Secaucus, N.J.
A SUBSTANTIAL part of all stock trading in the United States takes place in a warehouse in a nondescript business park just off the New Jersey Turnpike.
Few humans are present in this vast technological sanctum, known as New York Four. Instead, the building, nearly the size of three football fields, is filled with long avenues of computer servers illuminated by energy-efficient blue phosphorescent light.
Countless metal cages contain racks of computers that perform all kinds of trades for Wall Street banks, hedge funds, brokerage firms and other institutions. And within just one of these cages — a tight space measuring 40 feet by 45 feet and festooned with blue and white wires — is an array of servers that together form the mechanized heart of one of the top four stock exchanges in the United States.
The exchange is called Direct Edge, hardly a household name. But as the lights pulse on its servers, you can almost see the holdings in your 401(k) zip by.
“This,” says Steven Bonanno, the chief technology officer of the exchange, looking on proudly, “is where everyone does their magic.”
In many of the world’s markets, nearly all stock trading is now conducted by computers talking to other computers at high speeds. As the machines have taken over, trading has been migrating from raucous, populated trading floors like those of the New York Stock Exchange to dozens of separate, rival electronic exchanges. They rely on data centers like this one, many in the suburbs of northern New Jersey.
While this “Tron” landscape is dominated by the titans of Wall Street, it affects nearly everyone who owns shares of stock or mutual funds, or who has a stake in a pension fund or works for a public company. For better or for worse, part of your wealth, your livelihood, is throbbing through these wires.
The advantages of this new technological order are clear. Trading costs have plummeted, and anyone can buy stocks from anywhere in seconds with the simple click of a mouse or a tap on a smartphone’s screen.
But some experts wonder whether the technology is getting dangerously out of control. Even apart from the huge amounts of energy the megacomputers consume, and the dangers of putting so much of the economy’s plumbing in one place, they wonder whether the new world is a fairer one — and whether traders with access to the fastest machines win at the expense of ordinary investors.
It also seems to be a much more hair-trigger market. The so-called flash crash in the market last May — when stock prices plunged hundreds of points before recovering — showed how unpredictable the new systems could be. Fear of this volatile, blindingly fast market may be why ordinary investors have been withdrawing money from domestic stock mutual funds —$90 billion worth since May, according to figures from the Investment Company Institute.
No one knows whether this is a better world, and that includes the regulators, who are struggling to keep up with the pace of innovation in the great technological arms race that the stock market has become.
WILLIAM O’BRIEN, a former lawyer for Goldman Sachs, crosses the Hudson River each day from New York to reach his Jersey City destination — a shiny blue building opposite a Courtyard by Marriott.
Mr. O’Brien, 40, works there as chief executive of Direct Edge, the young electronic stock exchange that is part of New Jersey’s burgeoning financial ecosystem. Seven miles away, in Secaucus, is the New York Four warehouse that houses Direct Edge’s servers. Another cluster of data centers, serving various companies, is five miles north, in Weehawken, at the western mouth of the Lincoln Tunnel. And yet another is planted 20 miles south on the New Jersey Turnpike, at Exit 12, in Carteret, N.J.
As Mr. O’Brien says, “New Jersey is the new heart of Wall Street.”
Direct Edge’s office demonstrates that it doesn’t take many people to become a major outfit in today’s electronic market. The firm, whose motto is “Everybody needs some edge,” has only 90 employees, most of them on this building’s sixth floor. There are lines of cubicles for programmers and a small operations room where two men watch a wall of screens, checking that market-order traffic moves smoothly and, of course, quickly. Direct Edge receives up to 10,000 orders a second.
Mr. O’Brien’s personal story reflects the recent history of stock-exchange upheaval. A fit, blue-eyed Wall Street veteran, who wears the monogram “W O’B” on his purple shirt cuff, Mr. O’Brien is the son of a seat holder and trader on the floor of the New York Stock Exchange in the 1970s, when the Big Board was by far the biggest game around.
But in the 1980s, Nasdaq, a new electronic competitor, challenged that dominance. And a bigger upheaval came in the late 1990s and early 2000s, after the Securities and Exchange Commission enacted a series of regulations to foster competition and drive down commission costs for ordinary investors.
These changes forced the New York Stock Exchange and Nasdaq to post orders electronically and execute them immediately, at the best price available in the United States — suddenly giving an advantage to start-up operations that were faster and cheaper. Mr. O’Brien went to work for one of them, called Brut. The N.Y.S.E. and Nasdaq fought back, buying up smaller rivals: Nasdaq, for example, acquired Brut. And to give itself greater firepower, the N.Y.S.E., which had been member-owned, became a public, for-profit company.
Brokerage firms and traders came to fear that a Nasdaq-N.Y.S.E. duopoly was asserting itself, one that would charge them heavily for the right to trade, so they created their own exchanges. One was Direct Edge, which formally became an exchange six months ago. Another, the BATS Exchange, is located in another unlikely capital of stock market trading: Kansas City, Mo.
Direct Edge now trails the N.Y.S.E. and Nasdaq in size; it vies with BATS for third place. Direct Edge is backed by a powerful roster of financial players: Goldman Sachs, Knight Capital, Citadel Securities and the International Securities Exchange, its largest shareholder. JPMorgan also holds a stake. Direct Edge still occupies the same building as its original founder, Knight Capital, in Jersey City.
Saturday, January 1, 2011
Asian Stocks Advance in Year to Post Biggest Two-Year Increase Since 2004
Asian stocks advanced last year, capping the MSCI Asia Pacific Index’s biggest two-year gain since 2004, as improving corporate earnings and U.S. economic stimulus measures offset concern over Europe’s sovereign debt crisis and China’s anti-inflation measures.
BHP Billiton Ltd. advanced 4.9 percent in 2010, pacing gains among metal and energy producers on higher commodity prices. Cnooc Ltd., China’s largest offshore oil company, surged 51 percent in Hong Kong. Canon Inc., a Japanese camera maker which makes about 80 percent of its sales abroad, gained 7.7 percent in Tokyo as the U.S. expanded measures to boost its economy. Hyundai Heavy Industries Co., the world’s largest shipbuilder, soared 155 percent in Seoul after third-quarter profit jumped.
The MSCI Asia Pacific Index climbed 14.3 percent last year to 137.70, extending 2009’s 34 percent gain, supported by central banks cutting borrowing costs and governments boosting spending to shore up their economies to tackle the global recession. The Asia Pacific gauge sank by a record in 2008 as the credit crisis and a deepening global recession pummeled corporate profits around the world.
“Investor confidence has swung back to a view that the global recovery is on track,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Ltd., which manages about $90 billion. “Despite lingering concerns, it should continue with some solid earnings gains. Global liquidity is plentiful, while companies are cashed up, boosting the prospects for mergers and acquisitions, dividend increases and buybacks.”
Regional Benchmarks
Hong Kong’s Hang Seng Index climbed 5.3 percent in the last year, extending 2009’s 52 percent increase, the steepest since 1999. South Korea’s Kospi Index jumped 22 percent, while Australia’s S&P/ASX 200 Index declined 2.6 percent.
Japan’s Nikkei 225 Stock Average lost 3 percent, as a strengthening yen dimmed the earnings prospects of some of the nation’s exporters. The yen was at its strongest annual average level since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s closing price.
China’s Shanghai Composite Index declined 14 percent, the worst performer in Asia, as the government ordered banks to set aside more reserves six times last year and boosted rates to tame inflation and curb asset bubbles following record gains in lending and property prices. The benchmark also posted the biggest decline among 15 of the world’s largest stock markets.
Material Shares Lead
Material, energy and industrial stocks rose the most among the 10 industry groups tracked on the MSCI Asia Pacific Index in 2010, where stocks are valued at 14.8 times estimated earnings on average, compared with 14.7 times for the U.S. Standard & Poor’s 500 Index and 12.3 for the Europe Stoxx 600 Index.
BHP Billiton, the world’s largest mining company and Australia’s biggest oil producer, advanced 4.9 percent to A$45.25. The company was the leading mover on the MSCI Asia Pacific index last year. Rio Tinto Group, the world’s No. 3 mining company, advanced 14 percent to A$85.47. Cnooc surged 51 percent to HK$18.44 in Hong Kong, while Korea Zinc Co., which produces gold and silver, added 36 percent in Seoul.
Crude oil advanced in New York last year to the highest year-end level since 2007, while copper rose 33 percent to $4.447 a pound. Gold futures rallied 30 percent last year as Europe’s debt crisis drove investors to the precious metal as a haven.
Steep Gains
The MSCI Asia Pacific Index’s gains in 2010 take its two- year advance to 54 percent, the steepest since the period ended December 2004, when the region emerged from a retreat triggered by the bursting of the dot-com bubble in 2000. Gains in 2009 -- following 2008’s record 43 percent drop -- were spurred by a record lending and government stimulus measures in China, which helped pull the world economy out of recession.
“After markets bottom, they tend to have a quick recovery in the first year, before petering out and then stepping up again in the following years,” said James Holt, who helps manage about A$40 billion ($40 billion) at BlackRock Investment Management (Australia) Ltd.
The MSCI Asia Pacific gauge rose to a 21 month-high on April 15 as economic stimulus policies bore fruit, before dropping to an almost one-year low on May 25 amid concern slowing U.S. economic growth and China’s anti-inflation measures might choke off the recovery.
Europe, Fed Stimulus
The MSCI Asia Pacific Index has since risen 26.5 percent, to end the year at a 2 1/2-year high, as financial rescue plans for Greece and Ireland calmed concern that Europe’s sovereign debt crisis may spread to more countries, and after the U.S. Federal Reserve said Nov. 3 that it will buy an additional $600 billion of Treasuries to bolster growth in the world’s largest economy.
The Fed’s measures helped boost the shares of Asian exporters, with the MSCI Asia Pacific Consumer Discretionary Index rising 15 percent last year.
Li & Fung Ltd., the biggest supplier to retailers including Wal-Mart Stores Inc., jumped 40 percent to HK$45.10. Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, gained 48 percent to HK$21.45 as the global travel landscape brightened. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, gained 19 percent to 949,000 won in Seoul. In Tokyo, Canon advanced 7.7 percent to 4,210 yen.
Earnings Prompt Buying
Analysts estimate earnings per share on the MSCI Asia Pacific index are set to rise 11 percent in the next 12 months, according to data compiled by Bloomberg.
Hyundai Heavy surged 155 percent to 443,000 won in Seoul, as the company said on Oct. 28 that net income climbed to 863.4 billion won ($770 million) from 533.8 billion won a year earlier, beating the 716.9 billion won average of 22 analyst estimates compiled by Bloomberg.
SJM Holdings Ltd., the casino operator controlled by Macau billionaire Stanley Ho, soared 188 percent to HK$12.34 in Hong Kong after saying in August that its first-half profit rose more than fourfold after it added more tables for high rollers from China. SJM posted the fourth-biggest increase on the MSCI Asia Pacific index for the year.
Profits Rise
PT Charoen Pokphand Indonesia, Indonesia’s biggest producer of chicken feed, posted the biggest gain on the MSCI Asia Pacific index last year, surging 309 percent to close at 1,840 rupiah on Dec. 30, the final day of trade for the year in Jakarta. The company said in October that nine-month net income jumped 50 percent to 1.6 trillion rupiah.
Brilliance China Automotive Holdings Ltd., which makes vehicles with Bayerische Motoren Werke AG and Toyota Motor Corp., showed the fifth-biggest advance on the Asian index last year, jumping 171 percent to HK$5.93. The company said it returned to a profit in the first half of 2010 as economic growth spurred demand for luxury sedans in China, the world’s biggest auto market.
“Investors will look for resolution to Europe’s debt issues and China’s inflation problems, but risk appetite will be better next year than it was this year,” said Prasad Patkar, who helps manage about $1.8 in Sydney at Platypus Asset Management Ltd.
BHP Billiton Ltd. advanced 4.9 percent in 2010, pacing gains among metal and energy producers on higher commodity prices. Cnooc Ltd., China’s largest offshore oil company, surged 51 percent in Hong Kong. Canon Inc., a Japanese camera maker which makes about 80 percent of its sales abroad, gained 7.7 percent in Tokyo as the U.S. expanded measures to boost its economy. Hyundai Heavy Industries Co., the world’s largest shipbuilder, soared 155 percent in Seoul after third-quarter profit jumped.
The MSCI Asia Pacific Index climbed 14.3 percent last year to 137.70, extending 2009’s 34 percent gain, supported by central banks cutting borrowing costs and governments boosting spending to shore up their economies to tackle the global recession. The Asia Pacific gauge sank by a record in 2008 as the credit crisis and a deepening global recession pummeled corporate profits around the world.
“Investor confidence has swung back to a view that the global recovery is on track,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Ltd., which manages about $90 billion. “Despite lingering concerns, it should continue with some solid earnings gains. Global liquidity is plentiful, while companies are cashed up, boosting the prospects for mergers and acquisitions, dividend increases and buybacks.”
Regional Benchmarks
Hong Kong’s Hang Seng Index climbed 5.3 percent in the last year, extending 2009’s 52 percent increase, the steepest since 1999. South Korea’s Kospi Index jumped 22 percent, while Australia’s S&P/ASX 200 Index declined 2.6 percent.
Japan’s Nikkei 225 Stock Average lost 3 percent, as a strengthening yen dimmed the earnings prospects of some of the nation’s exporters. The yen was at its strongest annual average level since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s closing price.
China’s Shanghai Composite Index declined 14 percent, the worst performer in Asia, as the government ordered banks to set aside more reserves six times last year and boosted rates to tame inflation and curb asset bubbles following record gains in lending and property prices. The benchmark also posted the biggest decline among 15 of the world’s largest stock markets.
Material Shares Lead
Material, energy and industrial stocks rose the most among the 10 industry groups tracked on the MSCI Asia Pacific Index in 2010, where stocks are valued at 14.8 times estimated earnings on average, compared with 14.7 times for the U.S. Standard & Poor’s 500 Index and 12.3 for the Europe Stoxx 600 Index.
BHP Billiton, the world’s largest mining company and Australia’s biggest oil producer, advanced 4.9 percent to A$45.25. The company was the leading mover on the MSCI Asia Pacific index last year. Rio Tinto Group, the world’s No. 3 mining company, advanced 14 percent to A$85.47. Cnooc surged 51 percent to HK$18.44 in Hong Kong, while Korea Zinc Co., which produces gold and silver, added 36 percent in Seoul.
Crude oil advanced in New York last year to the highest year-end level since 2007, while copper rose 33 percent to $4.447 a pound. Gold futures rallied 30 percent last year as Europe’s debt crisis drove investors to the precious metal as a haven.
Steep Gains
The MSCI Asia Pacific Index’s gains in 2010 take its two- year advance to 54 percent, the steepest since the period ended December 2004, when the region emerged from a retreat triggered by the bursting of the dot-com bubble in 2000. Gains in 2009 -- following 2008’s record 43 percent drop -- were spurred by a record lending and government stimulus measures in China, which helped pull the world economy out of recession.
“After markets bottom, they tend to have a quick recovery in the first year, before petering out and then stepping up again in the following years,” said James Holt, who helps manage about A$40 billion ($40 billion) at BlackRock Investment Management (Australia) Ltd.
The MSCI Asia Pacific gauge rose to a 21 month-high on April 15 as economic stimulus policies bore fruit, before dropping to an almost one-year low on May 25 amid concern slowing U.S. economic growth and China’s anti-inflation measures might choke off the recovery.
Europe, Fed Stimulus
The MSCI Asia Pacific Index has since risen 26.5 percent, to end the year at a 2 1/2-year high, as financial rescue plans for Greece and Ireland calmed concern that Europe’s sovereign debt crisis may spread to more countries, and after the U.S. Federal Reserve said Nov. 3 that it will buy an additional $600 billion of Treasuries to bolster growth in the world’s largest economy.
The Fed’s measures helped boost the shares of Asian exporters, with the MSCI Asia Pacific Consumer Discretionary Index rising 15 percent last year.
Li & Fung Ltd., the biggest supplier to retailers including Wal-Mart Stores Inc., jumped 40 percent to HK$45.10. Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, gained 48 percent to HK$21.45 as the global travel landscape brightened. Samsung Electronics Co., Asia’s biggest maker of chips, flat screens and mobile phones, gained 19 percent to 949,000 won in Seoul. In Tokyo, Canon advanced 7.7 percent to 4,210 yen.
Earnings Prompt Buying
Analysts estimate earnings per share on the MSCI Asia Pacific index are set to rise 11 percent in the next 12 months, according to data compiled by Bloomberg.
Hyundai Heavy surged 155 percent to 443,000 won in Seoul, as the company said on Oct. 28 that net income climbed to 863.4 billion won ($770 million) from 533.8 billion won a year earlier, beating the 716.9 billion won average of 22 analyst estimates compiled by Bloomberg.
SJM Holdings Ltd., the casino operator controlled by Macau billionaire Stanley Ho, soared 188 percent to HK$12.34 in Hong Kong after saying in August that its first-half profit rose more than fourfold after it added more tables for high rollers from China. SJM posted the fourth-biggest increase on the MSCI Asia Pacific index for the year.
Profits Rise
PT Charoen Pokphand Indonesia, Indonesia’s biggest producer of chicken feed, posted the biggest gain on the MSCI Asia Pacific index last year, surging 309 percent to close at 1,840 rupiah on Dec. 30, the final day of trade for the year in Jakarta. The company said in October that nine-month net income jumped 50 percent to 1.6 trillion rupiah.
Brilliance China Automotive Holdings Ltd., which makes vehicles with Bayerische Motoren Werke AG and Toyota Motor Corp., showed the fifth-biggest advance on the Asian index last year, jumping 171 percent to HK$5.93. The company said it returned to a profit in the first half of 2010 as economic growth spurred demand for luxury sedans in China, the world’s biggest auto market.
“Investors will look for resolution to Europe’s debt issues and China’s inflation problems, but risk appetite will be better next year than it was this year,” said Prasad Patkar, who helps manage about $1.8 in Sydney at Platypus Asset Management Ltd.
Tata Nano Sales Rebound From Record Low as Warranty, Financing Win Buyers
Tata Motors Ltd.’s sales of the Nano, the world’s cheapest car, rebounded in December from a record low after the automaker more than doubled warranty lengths and offered easier financing terms.
Sales rose to 5,784 from 509 in November, according to a statement from the Mumbai-based automaker today. The December tally, a 60 percent increase from a year earlier, was below the 9,000 monthly sales record achieved in July.
Tata has begun television advertisements, added more sales points in smaller towns and introduced a 99 rupee ($2)-a- month maintenance option to help revive sales of the Nano, which costs as little as 137,555 rupees in New Delhi. Sales had fallen on a month-on-month basis since July because of price increases and safety concerns following at least three fires.
“Tata Motors is now focusing on the Nano because its reputation is riding on it,” said Umesh Karne, a Mumbai-based analyst with BRICS Securities Ltd., who has a ‘buy’ rating on the stock. “Measures such as easy financing and the maintenance offer have reassured customers.”
The automaker in December lengthened warranties to four years or 60,000 kilometers (37,282 miles) and added the maintenance plan. The company opened a factory in June with the capacity to build 250,000 Nanos a year.
Tata’s total vehicle sales, including trucks and buses, rose 31 percent from a year earlier in December to 67,441, according to the statement.
Second-Best Performer
The automaker in November said it would retrofit Nano cars with additional protection in exhaust and electrical systems after the fires. Investigations concluded that the reasons for the fires were “specific” to the cars involved, the company has said.
Tata Motors rose 0.6 percent to 1,308.35 rupees in Mumbai trading yesterday. The shares gained 65 percent last year, the second-best performer in the benchmark Sensitive Index of the Bombay Stock Exchange.
The November sales tally was the lowest for the Nano since the 624-cc car went on sale in 2009. Ratan Tata, the automaker’s chairman, decided to develop the car after seeing a family riding on a scooter.
The Nano is currently sold in 12 Indian states as the company works through initial orders and ramps up production. Tata expects to begin nationwide sales by March.
Sales rose to 5,784 from 509 in November, according to a statement from the Mumbai-based automaker today. The December tally, a 60 percent increase from a year earlier, was below the 9,000 monthly sales record achieved in July.
Tata has begun television advertisements, added more sales points in smaller towns and introduced a 99 rupee ($2)-a- month maintenance option to help revive sales of the Nano, which costs as little as 137,555 rupees in New Delhi. Sales had fallen on a month-on-month basis since July because of price increases and safety concerns following at least three fires.
“Tata Motors is now focusing on the Nano because its reputation is riding on it,” said Umesh Karne, a Mumbai-based analyst with BRICS Securities Ltd., who has a ‘buy’ rating on the stock. “Measures such as easy financing and the maintenance offer have reassured customers.”
The automaker in December lengthened warranties to four years or 60,000 kilometers (37,282 miles) and added the maintenance plan. The company opened a factory in June with the capacity to build 250,000 Nanos a year.
Tata’s total vehicle sales, including trucks and buses, rose 31 percent from a year earlier in December to 67,441, according to the statement.
Second-Best Performer
The automaker in November said it would retrofit Nano cars with additional protection in exhaust and electrical systems after the fires. Investigations concluded that the reasons for the fires were “specific” to the cars involved, the company has said.
Tata Motors rose 0.6 percent to 1,308.35 rupees in Mumbai trading yesterday. The shares gained 65 percent last year, the second-best performer in the benchmark Sensitive Index of the Bombay Stock Exchange.
The November sales tally was the lowest for the Nano since the 624-cc car went on sale in 2009. Ratan Tata, the automaker’s chairman, decided to develop the car after seeing a family riding on a scooter.
The Nano is currently sold in 12 Indian states as the company works through initial orders and ramps up production. Tata expects to begin nationwide sales by March.
Indian group buys Grosvenor House
An Indian company run by a billionaire industrialist has taken ownership of one of London’s landmark hotels after Royal Bank of Scotland, the UK taxpayer-backed bank, sold Grosvenor House for £470m.
Sahara India Pariwar, the Indian conglomerate run by Subrata Roy, won the bid for the Park Lane hotel on Thursday after months of negotiations with the bank.
EDITOR’S CHOICE
In depth: M&A - Dec-05
Hilton and Starwood settle dispute - Dec-23
Deutsche Bank takes gamble on casino - Dec-28
London hotel faces redevelopment - Nov-08
RBS took control of Grosvenor House in 2003 when Le Meridien, the hotel operator, fell into administration. The hotel was shifted into RBS’s non-core division and earmarked for sale as part of the bank’s efforts to shrink its balance sheet.
RBS owned a long lease on the five-star, 494-room Mayfair hotel, which will continue to be operated by Marriott International.
Sahara India Pariwar, which paid cash for the hotel, fought off competition from at least two other shortlisted bidders, thought to include sovereign and state wealth funds from Singapore, Qatar and China. The Candy brothers, the upmarket developers, were initially interested in the sale but were not involved in the final stages.
The Sahara conglomerate, which specialises in media and sport investment, had been the favourite to secure the deal.
Mr Roy is considered one of India’s most flamboyant businessmen, with strong political ties and contacts in the Mumbai film industry.
In recent months his company has held talks about rescuing Metro-Goldwyn-Mayer, the debt-ridden Hollywood studio, and had also expressed an interest in acquiring Liverpool Football Club.
Back on its home ground, Sahara sponsors India’s national cricket and hockey teams and spent a record $370m to buy an Indian Premier League cricket team.
The Grosvenor House Hotel opened in 1929 on the site of the former London residence of the Dukes of Westminster. It was refurbished by Marriott International and relaunched under the JW Marriott brand in 2008. It is the venue for many of the capital’s black-tie events.
The sale to Sahara is the latest in a string of hotel disposals by RBS after a lending spree in the boom years left it with a large portfolio of real estate. The bank has sold six hotels this year, including the Cumberland hotel in London, which was bought by Starwood Capital, the private equity firm, and four Hilton-operated hotels.
Scaling back its commercial real estate exposure is a key part of the run-off of non-core assets, which fell from £258bn at the start of 2009 to £154bn by the third quarter of 2010.
Sahara India Pariwar, the Indian conglomerate run by Subrata Roy, won the bid for the Park Lane hotel on Thursday after months of negotiations with the bank.
EDITOR’S CHOICE
In depth: M&A - Dec-05
Hilton and Starwood settle dispute - Dec-23
Deutsche Bank takes gamble on casino - Dec-28
London hotel faces redevelopment - Nov-08
RBS took control of Grosvenor House in 2003 when Le Meridien, the hotel operator, fell into administration. The hotel was shifted into RBS’s non-core division and earmarked for sale as part of the bank’s efforts to shrink its balance sheet.
RBS owned a long lease on the five-star, 494-room Mayfair hotel, which will continue to be operated by Marriott International.
Sahara India Pariwar, which paid cash for the hotel, fought off competition from at least two other shortlisted bidders, thought to include sovereign and state wealth funds from Singapore, Qatar and China. The Candy brothers, the upmarket developers, were initially interested in the sale but were not involved in the final stages.
The Sahara conglomerate, which specialises in media and sport investment, had been the favourite to secure the deal.
Mr Roy is considered one of India’s most flamboyant businessmen, with strong political ties and contacts in the Mumbai film industry.
In recent months his company has held talks about rescuing Metro-Goldwyn-Mayer, the debt-ridden Hollywood studio, and had also expressed an interest in acquiring Liverpool Football Club.
Back on its home ground, Sahara sponsors India’s national cricket and hockey teams and spent a record $370m to buy an Indian Premier League cricket team.
The Grosvenor House Hotel opened in 1929 on the site of the former London residence of the Dukes of Westminster. It was refurbished by Marriott International and relaunched under the JW Marriott brand in 2008. It is the venue for many of the capital’s black-tie events.
The sale to Sahara is the latest in a string of hotel disposals by RBS after a lending spree in the boom years left it with a large portfolio of real estate. The bank has sold six hotels this year, including the Cumberland hotel in London, which was bought by Starwood Capital, the private equity firm, and four Hilton-operated hotels.
Scaling back its commercial real estate exposure is a key part of the run-off of non-core assets, which fell from £258bn at the start of 2009 to £154bn by the third quarter of 2010.
Reliance Industries plans US expansion
Mukesh Ambani, India’s richest man and the head of the Reliance Industries business empire, is planning to expand his energy operations in the US, in a move underscoring how attractive the US remains in spite of its current economic difficulties.
The billionaire who expanded his father’s petrochemicals company into India’s most powerful conglomerate, plans to spend $10bn-$12bn in an expansion of Reliance’s US business, according to people he has confided in.
Mr Ambani's determination to grow outside India is part of his ambition to build a world-class company with a global reach – an ambition impossible to achieve if he operates only in India. Mr Ambani has told associates he considers the US, with India, as the “safest place” in the world in which to invest, the people added.
“Mukesh Ambani has become too big for India,” said the chairman of one of India’s leading banking groups. “In America, nobody looks at a billionaire.”
Reliance Industries, which has annual revenues of $44bn, operates the world’s biggest refinery complex on India’s west coast and the country’s largest gasfield on its east coast. The company is also expanding in what Mr Ambani calls “industries of the future” in India, such as telecommunications, hospitality and retail.
Mr Ambani’s decision comes at a time when the Indian business community is increasingly disillusioned with the government, in spite of an 8-9 per cent economic growth rate. A series of scandals and accusations of government inaction have led to frustration and a sense that India is losing its momentum among Indian corporations.
“Everyone in corporate India is risk-averse,” said the chief executive of one large infrastructure company. “They have done their asset accumulation and now they wish to derisk, and one way to derisk is to go offshore.”
Reliance has bought a series of stakes in US shale gas ventures this year, spending almost $3.5bn. Mr Ambani has said in the past he believes that shale gas will be increasingly attractive as a source of energy thanks to technological breakthroughs and the desire in the US to lessen dependence on foreign oil supply.
Reliance bought a 45 per cent holding in the Eagle Ford shale gas field in south Texas. It also paid $1.7bn for a joint venture with Atlas Energy, which has a shale gas field on the borders of Pennsylvania, West Virginia and New York states.
Mr Ambani is likely to seek local partners as he develops his strategy for North America. His preference is for partnership with a publicly listed entity, in the interests of transparency.
However, one potential link-up could be with KKR, the private equity firm. Henry Kravis, its co-founder and a frequent visitor to India, will be in Mumbai next week, and he and Mr Ambani plan to dine together.
KKR has deep knowledge of the US energy industry, through investments ranging from pipeline companies to utilities, such as its joint investment with TPG in Energy Future Holdings, the former TXU.
Reliance’s international expansion suffered a setback this year when an attempt to buy LyondellBasell for $14.5bn was thwarted by a management-backed debt restructuring proposal for the the Dutch chemicals group.
The billionaire who expanded his father’s petrochemicals company into India’s most powerful conglomerate, plans to spend $10bn-$12bn in an expansion of Reliance’s US business, according to people he has confided in.
Mr Ambani's determination to grow outside India is part of his ambition to build a world-class company with a global reach – an ambition impossible to achieve if he operates only in India. Mr Ambani has told associates he considers the US, with India, as the “safest place” in the world in which to invest, the people added.
“Mukesh Ambani has become too big for India,” said the chairman of one of India’s leading banking groups. “In America, nobody looks at a billionaire.”
Reliance Industries, which has annual revenues of $44bn, operates the world’s biggest refinery complex on India’s west coast and the country’s largest gasfield on its east coast. The company is also expanding in what Mr Ambani calls “industries of the future” in India, such as telecommunications, hospitality and retail.
Mr Ambani’s decision comes at a time when the Indian business community is increasingly disillusioned with the government, in spite of an 8-9 per cent economic growth rate. A series of scandals and accusations of government inaction have led to frustration and a sense that India is losing its momentum among Indian corporations.
“Everyone in corporate India is risk-averse,” said the chief executive of one large infrastructure company. “They have done their asset accumulation and now they wish to derisk, and one way to derisk is to go offshore.”
Reliance has bought a series of stakes in US shale gas ventures this year, spending almost $3.5bn. Mr Ambani has said in the past he believes that shale gas will be increasingly attractive as a source of energy thanks to technological breakthroughs and the desire in the US to lessen dependence on foreign oil supply.
Reliance bought a 45 per cent holding in the Eagle Ford shale gas field in south Texas. It also paid $1.7bn for a joint venture with Atlas Energy, which has a shale gas field on the borders of Pennsylvania, West Virginia and New York states.
Mr Ambani is likely to seek local partners as he develops his strategy for North America. His preference is for partnership with a publicly listed entity, in the interests of transparency.
However, one potential link-up could be with KKR, the private equity firm. Henry Kravis, its co-founder and a frequent visitor to India, will be in Mumbai next week, and he and Mr Ambani plan to dine together.
KKR has deep knowledge of the US energy industry, through investments ranging from pipeline companies to utilities, such as its joint investment with TPG in Energy Future Holdings, the former TXU.
Reliance’s international expansion suffered a setback this year when an attempt to buy LyondellBasell for $14.5bn was thwarted by a management-backed debt restructuring proposal for the the Dutch chemicals group.
Wednesday, December 29, 2010
John Hancock Tower Sells for $930 Million
The John Hancock Tower, a 62-story glass skyscraper in Boston’s Back Bay, was one of the first real estate trophies to run into trouble when the speculative property boom abruptly ended two years ago.
With the market in free fall, Normandy Real Estate Partners and Five Mile Capital Partners bought the building at a foreclosure auction 18 months ago for $660.6 million, or about half the price in 2006.
At 4 p.m. on Wednesday, Normandy and Five Mile officially sold the Hancock Tower to Boston Properties for $930 million.
“It is an epic conclusion for an iconic landmark,” said Finn Wentworth, a founding partner at Normandy, a real estate firm based in Morristown, N.J. “It’s due to a combination of real estate savvy and capital savvy.”
Wednesday’s deal reflects the current optimism coursing through the industry. Commercial buildings have recovered some of their value, and investors are looking to buy solid properties with good cash flow. Commercial mortgage securities also look healthier — although many experts warn that billions of dollars of loans are coming due in the next couple of years.
The turnaround of the Hancock Tower began with a risky plan in 2008 to buy pieces of the mezzanine debt, a junior debt that is less likely to be repaid. The goal of Normandy and Five Mile was to take control through foreclosure if the owner defaulted on the loans.
At the time no one knew if it would work, or even how much the building was worth.
Now, the strategy provides a template for other commercial real estate deals.
In 2009, the owner, Broadway Partners, defaulted on $472.1 million in secondary loans, but a senior mortgage remained current. Normandy and Five Mile bought more than $200 million in mezzanine loans from Lehman Brothers, the Royal Bank of Scotland and Greenwich Capital for about 30 cents on the dollar.
At the foreclosure auction on March 31, 2009, Normandy and Five Mile were the sole bidders, offering $20 million and taking on the senior mortgage.
“It was a pretty bold move, a calculated risk,” said Kevin O’Shea, the partner at Allen & Overy who represented Normandy. “They were rewarded when property values stabilized and core properties like the Hancock regained their value.”
Not everyone who has pursued the strategy has been so lucky.
William A. Ackman of Pershing Square Capital Management and Michael L. Ashner of Winthrop Realty Trust failed to gain control of the sprawling Stuyvesant Town and Peter Cooper Village this year. The two partners bought a $300 million swath of secondary loans on the Manhattan complexes for $45 million.
But their plan was foiled when the courts ruled that Mr. Ackman had to pay off the $3 billion senior mortgage before he could foreclose. Today, the 11,200-apartment properties are controlled by CW Capital, which represents the senior lenders.
“I have learned from prior experience that sometimes the better part of valor in an investment situation is to move on,” Mr. Ackman said of the deal in his third-quarter investment letter.
The Hancock Tower, a Boston landmark since it was built in 1975, has been a barometer for the real estate boom and bust.
In the months before the merger of John Hancock and Manulife Financial of Canada, the American insurer sold the Hancock Tower and three related properties in 2003 for $926.8 million to Alan M. Leventhal, the founder of Beacon Capital Partners.
In a transaction typical of that period, Mr. Leventhal put up $304 million, or roughly one-third of the purchase price, and took on a $623 million mortgage on the four properties. Beacon valued just the Hancock Tower and a nearby garage at about $639 million, according to real estate executives familiar with the deal.
Three years later, the commercial real estate market was roaring, fed by billions of dollars from foreign investors, pension funds and insurers and cheap debt from Wall Street banks and hedge funds. Mortgages, in turn, were packaged with other loans into a securities and sold to investors — freeing even more money to make deals.
With the money flowing, developers, private equity firms and hedge funds were able to buy properties with increasingly less cash. Many borrowed up to 80 percent of the purchase price, adding sizable second mortgages or mezzanine debt.
As the market neared its peak, Scott Lawlor, founder of Broadway Partners, a highflying money manager, paid $3.4 billion for the Hancock Tower and nine other properties in December 2006. The deal valued Hancock Tower and the garage at $1.35 billion, more than double the price in 2003, according to people familiar with the deal. But it also loaded the property with debt, with a mortgage and secondary loans that covered about 82 percent of the purchase price.
“This is a significant group of marquee properties in highly desirable markets that we are confident will deliver strong risk-adjusted returns to our investors,” Mr. Lawlor said at the time.
By the time Lehman Brothers collapsed in September 2008, property values had plunged by a third in Boston and elsewhere, according to analysts. Corporate tenants, like the Hill Holiday ad agency at the Hancock Tower, balked at constantly rising rents and moved out.
Normandy and Five Mile took over in the spring of 2009. Along the way, they refurbished the lobby and created an underground parking garage for top executives, spending more than $40 million on improvements. They were also able to offer lower rents than previous owners. And they scored a major coup in May when Bain Capital signed a lease for seven floors, a tenant lured away from a building owned by Boston Properties.
“Besides navigating the debt stack,” said Mr. Wentworth, “we created value the old fashioned way.”
In October, the two firms put the Hancock Tower on the auction block. Boston Properties was the winner, agreeing to put up $289.5 million and assume the $640.5 million mortgage.
The deal closed on Wednesday.
With the market in free fall, Normandy Real Estate Partners and Five Mile Capital Partners bought the building at a foreclosure auction 18 months ago for $660.6 million, or about half the price in 2006.
At 4 p.m. on Wednesday, Normandy and Five Mile officially sold the Hancock Tower to Boston Properties for $930 million.
“It is an epic conclusion for an iconic landmark,” said Finn Wentworth, a founding partner at Normandy, a real estate firm based in Morristown, N.J. “It’s due to a combination of real estate savvy and capital savvy.”
Wednesday’s deal reflects the current optimism coursing through the industry. Commercial buildings have recovered some of their value, and investors are looking to buy solid properties with good cash flow. Commercial mortgage securities also look healthier — although many experts warn that billions of dollars of loans are coming due in the next couple of years.
The turnaround of the Hancock Tower began with a risky plan in 2008 to buy pieces of the mezzanine debt, a junior debt that is less likely to be repaid. The goal of Normandy and Five Mile was to take control through foreclosure if the owner defaulted on the loans.
At the time no one knew if it would work, or even how much the building was worth.
Now, the strategy provides a template for other commercial real estate deals.
In 2009, the owner, Broadway Partners, defaulted on $472.1 million in secondary loans, but a senior mortgage remained current. Normandy and Five Mile bought more than $200 million in mezzanine loans from Lehman Brothers, the Royal Bank of Scotland and Greenwich Capital for about 30 cents on the dollar.
At the foreclosure auction on March 31, 2009, Normandy and Five Mile were the sole bidders, offering $20 million and taking on the senior mortgage.
“It was a pretty bold move, a calculated risk,” said Kevin O’Shea, the partner at Allen & Overy who represented Normandy. “They were rewarded when property values stabilized and core properties like the Hancock regained their value.”
Not everyone who has pursued the strategy has been so lucky.
William A. Ackman of Pershing Square Capital Management and Michael L. Ashner of Winthrop Realty Trust failed to gain control of the sprawling Stuyvesant Town and Peter Cooper Village this year. The two partners bought a $300 million swath of secondary loans on the Manhattan complexes for $45 million.
But their plan was foiled when the courts ruled that Mr. Ackman had to pay off the $3 billion senior mortgage before he could foreclose. Today, the 11,200-apartment properties are controlled by CW Capital, which represents the senior lenders.
“I have learned from prior experience that sometimes the better part of valor in an investment situation is to move on,” Mr. Ackman said of the deal in his third-quarter investment letter.
The Hancock Tower, a Boston landmark since it was built in 1975, has been a barometer for the real estate boom and bust.
In the months before the merger of John Hancock and Manulife Financial of Canada, the American insurer sold the Hancock Tower and three related properties in 2003 for $926.8 million to Alan M. Leventhal, the founder of Beacon Capital Partners.
In a transaction typical of that period, Mr. Leventhal put up $304 million, or roughly one-third of the purchase price, and took on a $623 million mortgage on the four properties. Beacon valued just the Hancock Tower and a nearby garage at about $639 million, according to real estate executives familiar with the deal.
Three years later, the commercial real estate market was roaring, fed by billions of dollars from foreign investors, pension funds and insurers and cheap debt from Wall Street banks and hedge funds. Mortgages, in turn, were packaged with other loans into a securities and sold to investors — freeing even more money to make deals.
With the money flowing, developers, private equity firms and hedge funds were able to buy properties with increasingly less cash. Many borrowed up to 80 percent of the purchase price, adding sizable second mortgages or mezzanine debt.
As the market neared its peak, Scott Lawlor, founder of Broadway Partners, a highflying money manager, paid $3.4 billion for the Hancock Tower and nine other properties in December 2006. The deal valued Hancock Tower and the garage at $1.35 billion, more than double the price in 2003, according to people familiar with the deal. But it also loaded the property with debt, with a mortgage and secondary loans that covered about 82 percent of the purchase price.
“This is a significant group of marquee properties in highly desirable markets that we are confident will deliver strong risk-adjusted returns to our investors,” Mr. Lawlor said at the time.
By the time Lehman Brothers collapsed in September 2008, property values had plunged by a third in Boston and elsewhere, according to analysts. Corporate tenants, like the Hill Holiday ad agency at the Hancock Tower, balked at constantly rising rents and moved out.
Normandy and Five Mile took over in the spring of 2009. Along the way, they refurbished the lobby and created an underground parking garage for top executives, spending more than $40 million on improvements. They were also able to offer lower rents than previous owners. And they scored a major coup in May when Bain Capital signed a lease for seven floors, a tenant lured away from a building owned by Boston Properties.
“Besides navigating the debt stack,” said Mr. Wentworth, “we created value the old fashioned way.”
In October, the two firms put the Hancock Tower on the auction block. Boston Properties was the winner, agreeing to put up $289.5 million and assume the $640.5 million mortgage.
The deal closed on Wednesday.
Asian Stocks Fluctuate as Japanese Exporters Fall, Commodity Shares Climb
Asian stocks fluctuated as the dollar weakened to a seven-week low against the yen, damping the outlook for Japanese export earnings. Commodity companies rose.
Toyota Motor Corp., a Japanese carmaker that counts North America as its biggest overseas market, declined 0.6 percent in Tokyo. Nintendo Co., a Japanese maker of video-game machines, dropped 1.3 percent. BHP Billiton Ltd., the world’s biggest mining company, increased 0.7 percent in Sydney. Newcrest Mining Ltd., Australia’s largest gold producer, climbed 0.6 percent.
“The yen’s appreciation will hang over the market” in Japan, said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “I don’t think people are rushing to sell stocks to lock in profits, because there are strong expectations that stocks will rise next year.”
The MSCI Asia Pacific Index rose 0.3 percent to 137.25 as of 9:44 a.m. in Tokyo, with more than three times as many stocks declining as advancing. The gauge has climbed 14 percent this year, and closed yesterday at its highest level since June 2008, on speculation that growth in corporate profits will weather Europe’s debt crisis, Chinese steps to curb inflation and concern about the pace of the U.S. economic rebound.
Japan’s Nikkei 225 Stock Average lost 0.5 percent, South Korea’s Kospi Index gained 0.2 percent and Australia’s S&P/ASX 200 Index increased 0.5 percent.
Futures on the U.S. Standard & Poor’s 500 Index climbed 0.1 percent. The index gained 0.1 percent yesterday, led by energy companies as crude oil remained above $90 a barrel for a fifth straight day.
Toyota, Honda, Nintendo
Toyota, Honda Motor Co. and Nintendo were among the heaviest drags on the MSCI Asia Pacific Index, and the largest contributors to the decline in Japan’s broad Topix index.
Toyota, the world’s biggest carmaker, dropped 0.6 percent to 3,230 yen. Honda, an automaker that receives 43 percent of its revenue from North America, slid 0.8 percent to 3,230 yen. Nintendo, the world’s largest maker of video-game players, lost 1.3 percent to 24,110 yen.
The dollar weakened against the yen for an eighth straight session yesterday, the longest streak since 2004. It depreciated to 81.40 yen today, the lowest intraday level since Nov. 9. A weaker dollar reduces the value of U.S. income at Japanese companies when converted into their home currency.
The yen is headed for its strongest annual average level against the dollar since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s closing price.
Toyota Motor Corp., a Japanese carmaker that counts North America as its biggest overseas market, declined 0.6 percent in Tokyo. Nintendo Co., a Japanese maker of video-game machines, dropped 1.3 percent. BHP Billiton Ltd., the world’s biggest mining company, increased 0.7 percent in Sydney. Newcrest Mining Ltd., Australia’s largest gold producer, climbed 0.6 percent.
“The yen’s appreciation will hang over the market” in Japan, said Mitsushige Akino, who oversees about $450 million in Tokyo at Ichiyoshi Investment Management Co. “I don’t think people are rushing to sell stocks to lock in profits, because there are strong expectations that stocks will rise next year.”
The MSCI Asia Pacific Index rose 0.3 percent to 137.25 as of 9:44 a.m. in Tokyo, with more than three times as many stocks declining as advancing. The gauge has climbed 14 percent this year, and closed yesterday at its highest level since June 2008, on speculation that growth in corporate profits will weather Europe’s debt crisis, Chinese steps to curb inflation and concern about the pace of the U.S. economic rebound.
Japan’s Nikkei 225 Stock Average lost 0.5 percent, South Korea’s Kospi Index gained 0.2 percent and Australia’s S&P/ASX 200 Index increased 0.5 percent.
Futures on the U.S. Standard & Poor’s 500 Index climbed 0.1 percent. The index gained 0.1 percent yesterday, led by energy companies as crude oil remained above $90 a barrel for a fifth straight day.
Toyota, Honda, Nintendo
Toyota, Honda Motor Co. and Nintendo were among the heaviest drags on the MSCI Asia Pacific Index, and the largest contributors to the decline in Japan’s broad Topix index.
Toyota, the world’s biggest carmaker, dropped 0.6 percent to 3,230 yen. Honda, an automaker that receives 43 percent of its revenue from North America, slid 0.8 percent to 3,230 yen. Nintendo, the world’s largest maker of video-game players, lost 1.3 percent to 24,110 yen.
The dollar weakened against the yen for an eighth straight session yesterday, the longest streak since 2004. It depreciated to 81.40 yen today, the lowest intraday level since Nov. 9. A weaker dollar reduces the value of U.S. income at Japanese companies when converted into their home currency.
The yen is headed for its strongest annual average level against the dollar since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s closing price.
Fee Squeeze Seen in 2011 by Top India Stock Arranger Citigroup
Fees for underwriting stock sales in India may remain near all-time lows as investment banks battle for market share, according to an executive at Citigroup Inc., the top-ranked adviser on equity offerings in the country.
Indian companies paid bankers 0.92 percent of the record $24 billion they raised locally this year in initial public offerings and additional sales as fees, the lowest ratio since Bloomberg began compiling the data in 1999. That compares with 3.5 percent in the U.S. and 2.17 percent in Hong Kong, the largest markets for stock offerings in 2010, the data show.
“On the top end of the deal pyramid, there is serious competition,” Ravi Kapoor, head of Citigroup’s global banking operations in India, said in a Dec. 22 interview in Mumbai. “We will still see sub-optimal fees being charged just to gain market share.”
State-run enterprises that paid near-zero fees in 2010 will continue to dominate India’s equity capital market next year along with infrastructure, manufacturing and services companies, Kapoor said. Citigroup, ranked fifth in the world for share sales, and five rivals accepted fees of less than $6 each to arrange government-controlled Coal India Ltd.’s record IPO.
India was the world’s eighth-largest market for IPOs and secondary offerings this year, Bloomberg data show.
Government-led sales accounted for about half the total amount raised in domestic share offers in 2010, according to data compiled by Bloomberg. New York-based Citigroup maintained its share of local equity sales at almost 16 percent for a second year, the data show.
Halfway to Target
Steel Authority of India Ltd., the nation’s second-largest producer of the alloy, and Oil & Natural Gas Corp., India’s biggest energy explorer, are among companies in which the government plans to sell stock, according to the Department of Disinvestment’s website, as Prime Minister Manmohan Singh’s administration seeks to narrow the budget deficit.
JPMorgan Chase & Co., HSBC Holdings Plc and Deutsche Bank AG are among six banks that agreed to split a fee of less than 0.02 cent for managing a proposed sale of shares in Steel Authority, two people with knowledge of the matter said in September.
Banks must match the lowest fees to win work on state deals, according to government guidelines.
The government has raised 227.6 billion rupees, about half its target for the 12 months through March 31, according to a Dec. 22 statement on the disinvestment department’s website.
Splitting Fees
Goldman Sachs Group Inc. and JPMorgan, both based in New York, were among four banks that earned about 2 rupees each last month for managing a 74 billion rupee sale of shares in state- run Power Grid Corp. of India, the nation’s biggest transmission company.
Citigroup retained its spot at the top of the Indian equity league table after it agreed to split 1,548 rupees in fees with five banks including Bank of America Corp., Deutsche Bank AG and Morgan Stanley for managing Coal India’s 155 billion rupee IPO in October.
The U.S. bank managed 16 share sales in India including offers by Reliance Industries Ltd. and Tata Motors Ltd., compared with 26 by runner-up Kotak Mahindra Capital Co. and 27 for third-ranked Enam Securities Pvt., Bloomberg data show. The figures don’t include rights offers or convertible bonds.
Insurers may sell shares if the government amends rules, including raising the foreign ownership limit to 49 percent from 26 percent, said Kapoor, 48, declining to name any firms. The government’s proposal to raise the cap has been stuck in parliament for three years because of a lack of consensus.
Accelerating Growth
Economic growth of 8 percent to 9 percent would also force companies to seek funding to sustain expansion plans and prepare for acquisitions in India and abroad, Kapoor said. Asia’s third- largest economy may expand 9 percent in the fiscal year that starts April 1, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Dec. 24.
“We will see a continued flow of debt and equity funds into Indian markets next year given the outlook for robust growth,” Kapoor said. Citigroup ranked first among underwriters of overseas bonds in India this year, accounting for 18 percent of the $11.2 billion of deals, according to Bloomberg data.
Stock underwriting and mergers advisory services generate a larger share of investment banking revenue than debt capital markets in India, Kapoor said. Frankfurt-based Deutsche Bank ranked second in managing bond sales, and Edinburgh-based Royal Bank of Scotland Group Plc was No. 3, Bloomberg data show.
Indian companies paid bankers 0.92 percent of the record $24 billion they raised locally this year in initial public offerings and additional sales as fees, the lowest ratio since Bloomberg began compiling the data in 1999. That compares with 3.5 percent in the U.S. and 2.17 percent in Hong Kong, the largest markets for stock offerings in 2010, the data show.
“On the top end of the deal pyramid, there is serious competition,” Ravi Kapoor, head of Citigroup’s global banking operations in India, said in a Dec. 22 interview in Mumbai. “We will still see sub-optimal fees being charged just to gain market share.”
State-run enterprises that paid near-zero fees in 2010 will continue to dominate India’s equity capital market next year along with infrastructure, manufacturing and services companies, Kapoor said. Citigroup, ranked fifth in the world for share sales, and five rivals accepted fees of less than $6 each to arrange government-controlled Coal India Ltd.’s record IPO.
India was the world’s eighth-largest market for IPOs and secondary offerings this year, Bloomberg data show.
Government-led sales accounted for about half the total amount raised in domestic share offers in 2010, according to data compiled by Bloomberg. New York-based Citigroup maintained its share of local equity sales at almost 16 percent for a second year, the data show.
Halfway to Target
Steel Authority of India Ltd., the nation’s second-largest producer of the alloy, and Oil & Natural Gas Corp., India’s biggest energy explorer, are among companies in which the government plans to sell stock, according to the Department of Disinvestment’s website, as Prime Minister Manmohan Singh’s administration seeks to narrow the budget deficit.
JPMorgan Chase & Co., HSBC Holdings Plc and Deutsche Bank AG are among six banks that agreed to split a fee of less than 0.02 cent for managing a proposed sale of shares in Steel Authority, two people with knowledge of the matter said in September.
Banks must match the lowest fees to win work on state deals, according to government guidelines.
The government has raised 227.6 billion rupees, about half its target for the 12 months through March 31, according to a Dec. 22 statement on the disinvestment department’s website.
Splitting Fees
Goldman Sachs Group Inc. and JPMorgan, both based in New York, were among four banks that earned about 2 rupees each last month for managing a 74 billion rupee sale of shares in state- run Power Grid Corp. of India, the nation’s biggest transmission company.
Citigroup retained its spot at the top of the Indian equity league table after it agreed to split 1,548 rupees in fees with five banks including Bank of America Corp., Deutsche Bank AG and Morgan Stanley for managing Coal India’s 155 billion rupee IPO in October.
The U.S. bank managed 16 share sales in India including offers by Reliance Industries Ltd. and Tata Motors Ltd., compared with 26 by runner-up Kotak Mahindra Capital Co. and 27 for third-ranked Enam Securities Pvt., Bloomberg data show. The figures don’t include rights offers or convertible bonds.
Insurers may sell shares if the government amends rules, including raising the foreign ownership limit to 49 percent from 26 percent, said Kapoor, 48, declining to name any firms. The government’s proposal to raise the cap has been stuck in parliament for three years because of a lack of consensus.
Accelerating Growth
Economic growth of 8 percent to 9 percent would also force companies to seek funding to sustain expansion plans and prepare for acquisitions in India and abroad, Kapoor said. Asia’s third- largest economy may expand 9 percent in the fiscal year that starts April 1, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Dec. 24.
“We will see a continued flow of debt and equity funds into Indian markets next year given the outlook for robust growth,” Kapoor said. Citigroup ranked first among underwriters of overseas bonds in India this year, accounting for 18 percent of the $11.2 billion of deals, according to Bloomberg data.
Stock underwriting and mergers advisory services generate a larger share of investment banking revenue than debt capital markets in India, Kapoor said. Frankfurt-based Deutsche Bank ranked second in managing bond sales, and Edinburgh-based Royal Bank of Scotland Group Plc was No. 3, Bloomberg data show.
Tuesday, December 28, 2010
Wi-Fi Overload at High-Tech Meetings
SAN FRANCISCO — Internet entrepreneurs climb on stage at technology conferences and praise a world in which everyone is perpetually connected to the Web.
But down in the audience, where people are busy typing and transmitting this wisdom, getting a Wi-Fi connection is often downright impossible.
“I’ve been to 50 events where the organizer gets on stage and says, ‘It will work,’ ” said Jason Calacanis, chief executive of Mahalo, a Web search company. “It never does.”
Last month in San Francisco at the Web 2.0 Summit, where about 1,000 people heard such luminaries as Mark Zuckerberg of Facebook, Julius Genachowski, chairman of the Federal Communications Commission, and Eric E. Schmidt of Google talk about the digital future, the Wi-Fi slowed or stalled at times.
Earlier this year, Steven P. Jobs, Apple’s chief executive, had to ask the audience at his company’s developer conference to turn off their laptops and phones after his introduction of the iPhone 4 was derailed because of an overloaded Wi-Fi network.
And few of Silicon Valley’s technorati seem willing to forget one of the biggest Wi-Fi breakdowns, on the opening day of a conference in 2008 co-hosted by the technology blog TechCrunch. It left much of the audience steaming over the lack of Internet access. The next morning, the organizers — who included Mr. Calacanis — clambered onto the stage to apologize and announce that they had fired the company that installed the Wi-Fi.
Technology conferences are like revival meetings for entrepreneurs, deal makers and the digitally obsessed. Attendees compulsively blog, e-mail, text and send photos and video from their seats.
Some go so far as to watch a webcast of the event on their laptops rather than look up at the real thing right in front of them. Nearly all conferences make free Wi-Fi available to keep the crowd feeling connected and productive.
The problem is that Wi-Fi was never intended for large halls and thousands of people, many of them bristling with an arsenal of laptops, iPhones and iPads. Mr. Calacanis went to the extreme at the Web 2.0 Summit by bringing six devices to get online — a laptop, two smartphones and three wireless routers.
He explained — while writing e-mails on his laptop — that as a chief executive and investor, he needed dependable Internet access at all times. “You’ve still got to work,” Mr. Calacanis said.
Wi-Fi is meant for homes and other small spaces with more modest Internet demands, says Ernie Mariette, founder of Mariette Systems, which installs conference Wi-Fi. “You’re asking a technology to operate beyond its capability.”
Conference organizers and the Wi-Fi specialists they hire often fail to provide enough bandwidth. Many depend on the infrastructure that the hotels or convention centers hosting their events already have in place.
Companies that install Wi-Fi networks sometimes have only a day to set up their equipment in a hall and then test it. They must plan not only for the number of attendees, but also the size and shape of the room, along with how Wi-Fi signals reflect from walls and are absorbed by the audience.
“Every space is different and every crowd is different,” Mr. Mariette said.
What is good enough for a convention of podiatrists is woefully inadequate for Silicon Valley’s connected set.
“I’ve been to health care conferences where no one brings a laptop,” said Ross Mayfield, president of the business software company Socialtext and a technology conference regular.
Technology conferences are an anomaly. Some regulars joke, perhaps accurately, that the events are host to more Internet devices per square foot than anywhere in the world. All too often, the network freezes after becoming overwhelmed with all the nonstop streaming, downloading and social networking.
That was what happened this year at the RailsConf, a software conference in Baltimore, when attendees caused Wi-Fi gridlock by tuning in to a webcast of an unrelated event across the country. Nearly everyone, it turned out, wanted to watch Apple’s live unveiling of the iPhone 4, the very one that fell victim to a Wi-Fi crash.
Adding more Wi-Fi access points does not necessarily fix the problem, Mr. Mariette said. In fact, doing so may make the situation worse by creating more interference.
To avoid Wi-Fi gridlock, conference organizers sometimes ask attendees to turn off electronics they are not using and to refrain from downloading big files. Cooperation is generally mixed, however.
Last year, an attendee at Web 2.0 Expo in New York was so desperate to get online that he offered to pay Oren Michels, chief executive of Mashery, a Web services company, to share his mobile Internet connection. MiFi, as the device is called, enables users to create mini-Internet hot spots using a mobile carrier’s network, not conference Wi-Fi.
“He said, ‘Can I give you 20 bucks for access?’ ” Mr. Michels recalled. “It was just some random person sitting next to me.”
Even if Wi-Fi devices are not connected to the network, they constantly emit signals that create background noise, sometimes until it becomes impossible to get online. IPhones and most BlackBerrys, along with certain laptops, are more susceptible than other devices because they operate on 2.4 GHz, a part of the spectrum that offers only three channels.
The Wi-Fi curse also extends to tech industry press conferences. Google, for instance, once held a press day at its headquarters in Mountain View, Calif., during which the Wi-Fi failed for several hours, although it was restored during the event’s final minutes. The flub did not exactly build confidence that Google and its partner, EarthLink, could deliver on their plans — since abandoned — to blanket San Francisco with free Wi-Fi.
But down in the audience, where people are busy typing and transmitting this wisdom, getting a Wi-Fi connection is often downright impossible.
“I’ve been to 50 events where the organizer gets on stage and says, ‘It will work,’ ” said Jason Calacanis, chief executive of Mahalo, a Web search company. “It never does.”
Last month in San Francisco at the Web 2.0 Summit, where about 1,000 people heard such luminaries as Mark Zuckerberg of Facebook, Julius Genachowski, chairman of the Federal Communications Commission, and Eric E. Schmidt of Google talk about the digital future, the Wi-Fi slowed or stalled at times.
Earlier this year, Steven P. Jobs, Apple’s chief executive, had to ask the audience at his company’s developer conference to turn off their laptops and phones after his introduction of the iPhone 4 was derailed because of an overloaded Wi-Fi network.
And few of Silicon Valley’s technorati seem willing to forget one of the biggest Wi-Fi breakdowns, on the opening day of a conference in 2008 co-hosted by the technology blog TechCrunch. It left much of the audience steaming over the lack of Internet access. The next morning, the organizers — who included Mr. Calacanis — clambered onto the stage to apologize and announce that they had fired the company that installed the Wi-Fi.
Technology conferences are like revival meetings for entrepreneurs, deal makers and the digitally obsessed. Attendees compulsively blog, e-mail, text and send photos and video from their seats.
Some go so far as to watch a webcast of the event on their laptops rather than look up at the real thing right in front of them. Nearly all conferences make free Wi-Fi available to keep the crowd feeling connected and productive.
The problem is that Wi-Fi was never intended for large halls and thousands of people, many of them bristling with an arsenal of laptops, iPhones and iPads. Mr. Calacanis went to the extreme at the Web 2.0 Summit by bringing six devices to get online — a laptop, two smartphones and three wireless routers.
He explained — while writing e-mails on his laptop — that as a chief executive and investor, he needed dependable Internet access at all times. “You’ve still got to work,” Mr. Calacanis said.
Wi-Fi is meant for homes and other small spaces with more modest Internet demands, says Ernie Mariette, founder of Mariette Systems, which installs conference Wi-Fi. “You’re asking a technology to operate beyond its capability.”
Conference organizers and the Wi-Fi specialists they hire often fail to provide enough bandwidth. Many depend on the infrastructure that the hotels or convention centers hosting their events already have in place.
Companies that install Wi-Fi networks sometimes have only a day to set up their equipment in a hall and then test it. They must plan not only for the number of attendees, but also the size and shape of the room, along with how Wi-Fi signals reflect from walls and are absorbed by the audience.
“Every space is different and every crowd is different,” Mr. Mariette said.
What is good enough for a convention of podiatrists is woefully inadequate for Silicon Valley’s connected set.
“I’ve been to health care conferences where no one brings a laptop,” said Ross Mayfield, president of the business software company Socialtext and a technology conference regular.
Technology conferences are an anomaly. Some regulars joke, perhaps accurately, that the events are host to more Internet devices per square foot than anywhere in the world. All too often, the network freezes after becoming overwhelmed with all the nonstop streaming, downloading and social networking.
That was what happened this year at the RailsConf, a software conference in Baltimore, when attendees caused Wi-Fi gridlock by tuning in to a webcast of an unrelated event across the country. Nearly everyone, it turned out, wanted to watch Apple’s live unveiling of the iPhone 4, the very one that fell victim to a Wi-Fi crash.
Adding more Wi-Fi access points does not necessarily fix the problem, Mr. Mariette said. In fact, doing so may make the situation worse by creating more interference.
To avoid Wi-Fi gridlock, conference organizers sometimes ask attendees to turn off electronics they are not using and to refrain from downloading big files. Cooperation is generally mixed, however.
Last year, an attendee at Web 2.0 Expo in New York was so desperate to get online that he offered to pay Oren Michels, chief executive of Mashery, a Web services company, to share his mobile Internet connection. MiFi, as the device is called, enables users to create mini-Internet hot spots using a mobile carrier’s network, not conference Wi-Fi.
“He said, ‘Can I give you 20 bucks for access?’ ” Mr. Michels recalled. “It was just some random person sitting next to me.”
Even if Wi-Fi devices are not connected to the network, they constantly emit signals that create background noise, sometimes until it becomes impossible to get online. IPhones and most BlackBerrys, along with certain laptops, are more susceptible than other devices because they operate on 2.4 GHz, a part of the spectrum that offers only three channels.
The Wi-Fi curse also extends to tech industry press conferences. Google, for instance, once held a press day at its headquarters in Mountain View, Calif., during which the Wi-Fi failed for several hours, although it was restored during the event’s final minutes. The flub did not exactly build confidence that Google and its partner, EarthLink, could deliver on their plans — since abandoned — to blanket San Francisco with free Wi-Fi.
Mumbai Developers to Cut Record Home Prices as Sales Decline, IIFL Says
Mumbai developers may cut record- high home prices to revive flagging sales after banks curbed credit to the sector, according to IIFL Ltd.
Registrations for home sales, leases and property transfers fell 15 percent this quarter from the three months ended Sept. 30, the brokerage said in a note yesterday. “Selective price cuts” are expected in the quarter ending March, it said.
Real estate companies face rising borrowing costs and shrinking access to credit after a corruption probe into loans to some developers, according to Bank of America Corp.’s Merrill Lynch unit and Ambit Capital Pvt. Lenders may cut back on funds to the real estate industry for the next three to six months, Merrill Lynch said in a note to clients on Dec. 1.
“Fresh lending to real estate developers by state-run banks is taking longer than in the past,” Bhaskar Chakraborty and Avi Mehta, Mumbai-based analysts at IIFL, said in the note. “We see developers with debt refinancing requirement in the second half of the fiscal year ending 2011 increasingly coming under pressure to cut prices to monetize inventory.”
Property prices in Mumbai have climbed between 15 percent and 25 percent since April to all-time high levels, according to IIFL, ranked India’s third-best domestic brokerage in an Asiamoney poll this year.
The increase in home prices affected affordability and in turn sales volumes in a quarter that’s seasonally the strongest for real estate sales because of the holiday season, it said.
Registration data is a lagging indicator of demand as properties are registered two to three months after the actual purchase.
Registrations for home sales, leases and property transfers fell 15 percent this quarter from the three months ended Sept. 30, the brokerage said in a note yesterday. “Selective price cuts” are expected in the quarter ending March, it said.
Real estate companies face rising borrowing costs and shrinking access to credit after a corruption probe into loans to some developers, according to Bank of America Corp.’s Merrill Lynch unit and Ambit Capital Pvt. Lenders may cut back on funds to the real estate industry for the next three to six months, Merrill Lynch said in a note to clients on Dec. 1.
“Fresh lending to real estate developers by state-run banks is taking longer than in the past,” Bhaskar Chakraborty and Avi Mehta, Mumbai-based analysts at IIFL, said in the note. “We see developers with debt refinancing requirement in the second half of the fiscal year ending 2011 increasingly coming under pressure to cut prices to monetize inventory.”
Property prices in Mumbai have climbed between 15 percent and 25 percent since April to all-time high levels, according to IIFL, ranked India’s third-best domestic brokerage in an Asiamoney poll this year.
The increase in home prices affected affordability and in turn sales volumes in a quarter that’s seasonally the strongest for real estate sales because of the holiday season, it said.
Registration data is a lagging indicator of demand as properties are registered two to three months after the actual purchase.
Monday, December 27, 2010
Defying the Pessimists, Holiday Sales Rebound
Americans are splurging as though it’s 2007 again.
Shoppers spent more money this holiday season than even before the recession, according to preliminary retail data released on Monday.
After a 6 percent free fall in 2008 and a 4 percent uptick last year, retail spending rose 5.5 percent in the 50 days before Christmas, exceeding even the more optimistic forecasts, according to MasterCard Advisors SpendingPulse, which tracks retail spending.
The rise was seen in just about every retail category. Apparel led the way, with an increase of 11.2 percent. Jewelry was up 8.4 percent, and luxury goods like handbags and expensive department-store clothes increased 6.7 percent.
There was even a slight increase in purchases of home furniture, which had four consecutive years of declining sales. The figures include in-store and online sales, and exclude autos.
“For the past year or two, when I’ve seen growth in one area, it seems to come at the expense of another,” said Michael McNamara, vice president for research and analysis at SpendingPulse. “Here, things are actually all moving in the right direction.”
Of course, the broad increase was driven in part by higher spending on necessities like gas and food. And even with the across-the-board gains, some categories, like furniture and electronics, have still not climbed back to their prerecession levels.
Several retailers will report December sales in January, and they are trying to finish the month strong.
A blizzard on the East Coast may have kept away shoppers on Dec. 26, when stores typically try to capitalize on store traffic for exchanges, returns and gift cards. But analysts said that the stores would not lose those sales — they would just be pushed later in the month, or into January.
The MasterCard data suggests that the pre-Christmas sales increase was the biggest in five years. Spending reached about $584.3 billion, compared with $566.3 billion in that period in 2007.
The 5.5 percent rise beat even the retail industry’s projections. The National Retail Federation was expecting a 3.3 percent improvement, and the ShopperTrak research service anticipated a 4 percent increase (both excluded automobiles, gas and restaurants).
“In the face of 10 percent unemployment and persistent housing woes, the American consumer has single-handedly picked himself off the mat, brushed his troubles off and strapped the U.S. economy on his back,” Craig R. Johnson, the president of the consulting firm Customer Growth Partners, wrote in an e-mail.
Analysts offered several theories for the rebound in spending while the unemployment rate remained stubbornly high.
Stocks have soared to their highest levels in more than two years, giving those with higher incomes greater freedom to spend. Luxury stores like Tiffany and Saks Fifth Avenue, for example, have been posting big sales increases.
Pent-up demand is also showing up among middle-income shoppers: in government surveys, consumers have been expressing rising confidence for the last five months.
The luxury segment started heating up in late summer, said Joel Bines, a director in the global retail practice at AlixPartners.
“That trickled down to the upper- to midtier consumer, and then the midtier consumer,” he said. Once the luxury market stabilized, confidence seems to have spread, “in the media, at work, with your friends,” he said.
The sales figures were bolstered by improved inventory controls among many retailers. After two years of heavy discounting, retailers cut the number of products they held in stock rooms, in an attempt to train shoppers to buy items at full price rather than wait for sales. The strategy seems to have worked.
Shoppers browsing through after-Christmas sales said in interviews that they were still hunting for deals, but they were also feeling that the economy was stabilizing after three years of merciless uncertainty.
In Pontiac, Ill., Gwen Hilsabeck rose at 4 a.m. Sunday for a 90-minute drive through snow flurries from her house to the upstate Woodfield Mall in Schaumburg, northwest of Chicago.
“I bought two dresses on sale at Ann Taylor, and I bought four dresses on the clearance rack at Nordstrom,” said Ms. Hilsabeck, a manager at a hospice company who said she had spent $800 to $900 so far.
“I’m spending more on myself because I’m starting to feel a little more at ease,” she said, “and my 401(k) has stopped going down.”
Where the snowstorms were not a factor, stores prepared for a wave of shoppers using gift cards. At J. C. Penney, Dec. 26 is usually the second-biggest day of the year in volume of transactions, including returns, exchanges and new purchases, said Myron E. Ullman III, the company’s chairman and chief executive.
J. C. Penney tries to attract teenagers, who are frequent recipients of gift cards, on Dec. 26 by bringing in new merchandise. People “have got money in their hand if they’ve got a gift card,” Mr. Ullman said.
Indeed, gift cards continued to be popular this year, and some shoppers said they were trying to maximize their value by using them during after-Christmas sales.
“It lets you shop the day after Christmas, so you can save a lot of money,” Shelly Lara, 42, an in-home nurse from Ashtabula, Ohio, said on Sunday.
She said that even though her family was doing fine financially, the Cleveland Clinic, which owned her company, had announced some layoffs, and her husband’s company had stopped contributing to his 401(k) for six months.
“There were some scares,” Ms. Lara said. “We wanted to make sure we got the most for our money.”
Stores seemed to have planned for the holiday season appropriately, with few resorting to the huge price slashing of the last couple of years.
“There was a good match between inventory and demand,” Mr. McNamara of SpendingPulse said. “I didn’t see any evidence of unusual discounting.”
For shoppers, that meant that the hunt for deals was a bit harder after Christmas this year.
“I remember a few years ago when you could double your money if you went shopping the day after Christmas,” said Kim Rayburn, 40, a hairdresser who was looking at costume jewelry at Forever 21 at Polaris Fashion Place in Columbus, Ohio, with her daughter Samantha, 12. “It’s not like that anymore. Now it seems just like a regular shopping day.”
Shoppers spent more money this holiday season than even before the recession, according to preliminary retail data released on Monday.
After a 6 percent free fall in 2008 and a 4 percent uptick last year, retail spending rose 5.5 percent in the 50 days before Christmas, exceeding even the more optimistic forecasts, according to MasterCard Advisors SpendingPulse, which tracks retail spending.
The rise was seen in just about every retail category. Apparel led the way, with an increase of 11.2 percent. Jewelry was up 8.4 percent, and luxury goods like handbags and expensive department-store clothes increased 6.7 percent.
There was even a slight increase in purchases of home furniture, which had four consecutive years of declining sales. The figures include in-store and online sales, and exclude autos.
“For the past year or two, when I’ve seen growth in one area, it seems to come at the expense of another,” said Michael McNamara, vice president for research and analysis at SpendingPulse. “Here, things are actually all moving in the right direction.”
Of course, the broad increase was driven in part by higher spending on necessities like gas and food. And even with the across-the-board gains, some categories, like furniture and electronics, have still not climbed back to their prerecession levels.
Several retailers will report December sales in January, and they are trying to finish the month strong.
A blizzard on the East Coast may have kept away shoppers on Dec. 26, when stores typically try to capitalize on store traffic for exchanges, returns and gift cards. But analysts said that the stores would not lose those sales — they would just be pushed later in the month, or into January.
The MasterCard data suggests that the pre-Christmas sales increase was the biggest in five years. Spending reached about $584.3 billion, compared with $566.3 billion in that period in 2007.
The 5.5 percent rise beat even the retail industry’s projections. The National Retail Federation was expecting a 3.3 percent improvement, and the ShopperTrak research service anticipated a 4 percent increase (both excluded automobiles, gas and restaurants).
“In the face of 10 percent unemployment and persistent housing woes, the American consumer has single-handedly picked himself off the mat, brushed his troubles off and strapped the U.S. economy on his back,” Craig R. Johnson, the president of the consulting firm Customer Growth Partners, wrote in an e-mail.
Analysts offered several theories for the rebound in spending while the unemployment rate remained stubbornly high.
Stocks have soared to their highest levels in more than two years, giving those with higher incomes greater freedom to spend. Luxury stores like Tiffany and Saks Fifth Avenue, for example, have been posting big sales increases.
Pent-up demand is also showing up among middle-income shoppers: in government surveys, consumers have been expressing rising confidence for the last five months.
The luxury segment started heating up in late summer, said Joel Bines, a director in the global retail practice at AlixPartners.
“That trickled down to the upper- to midtier consumer, and then the midtier consumer,” he said. Once the luxury market stabilized, confidence seems to have spread, “in the media, at work, with your friends,” he said.
The sales figures were bolstered by improved inventory controls among many retailers. After two years of heavy discounting, retailers cut the number of products they held in stock rooms, in an attempt to train shoppers to buy items at full price rather than wait for sales. The strategy seems to have worked.
Shoppers browsing through after-Christmas sales said in interviews that they were still hunting for deals, but they were also feeling that the economy was stabilizing after three years of merciless uncertainty.
In Pontiac, Ill., Gwen Hilsabeck rose at 4 a.m. Sunday for a 90-minute drive through snow flurries from her house to the upstate Woodfield Mall in Schaumburg, northwest of Chicago.
“I bought two dresses on sale at Ann Taylor, and I bought four dresses on the clearance rack at Nordstrom,” said Ms. Hilsabeck, a manager at a hospice company who said she had spent $800 to $900 so far.
“I’m spending more on myself because I’m starting to feel a little more at ease,” she said, “and my 401(k) has stopped going down.”
Where the snowstorms were not a factor, stores prepared for a wave of shoppers using gift cards. At J. C. Penney, Dec. 26 is usually the second-biggest day of the year in volume of transactions, including returns, exchanges and new purchases, said Myron E. Ullman III, the company’s chairman and chief executive.
J. C. Penney tries to attract teenagers, who are frequent recipients of gift cards, on Dec. 26 by bringing in new merchandise. People “have got money in their hand if they’ve got a gift card,” Mr. Ullman said.
Indeed, gift cards continued to be popular this year, and some shoppers said they were trying to maximize their value by using them during after-Christmas sales.
“It lets you shop the day after Christmas, so you can save a lot of money,” Shelly Lara, 42, an in-home nurse from Ashtabula, Ohio, said on Sunday.
She said that even though her family was doing fine financially, the Cleveland Clinic, which owned her company, had announced some layoffs, and her husband’s company had stopped contributing to his 401(k) for six months.
“There were some scares,” Ms. Lara said. “We wanted to make sure we got the most for our money.”
Stores seemed to have planned for the holiday season appropriately, with few resorting to the huge price slashing of the last couple of years.
“There was a good match between inventory and demand,” Mr. McNamara of SpendingPulse said. “I didn’t see any evidence of unusual discounting.”
For shoppers, that meant that the hunt for deals was a bit harder after Christmas this year.
“I remember a few years ago when you could double your money if you went shopping the day after Christmas,” said Kim Rayburn, 40, a hairdresser who was looking at costume jewelry at Forever 21 at Polaris Fashion Place in Columbus, Ohio, with her daughter Samantha, 12. “It’s not like that anymore. Now it seems just like a regular shopping day.”
U.S. Entices Big Banks in Canada
OTTAWA — The Bank of Nova Scotia is sometimes praised for having a nearly perfect record with its investments in the United States. But it is the only one of Canada’s five large banks that has largely avoided the American market.
Stephen Harper, the prime minister of Canada, is among the many Canadians who regularly remind the world that their country’s banking system was left largely unscathed by the global recession and credit market collapse because of its regulation and prudent management.
Now several of the banks are taking advantage of their solid balance sheets as well as the current revamping and consolidation of the American banking system to again look south for expansion. Last week, the Toronto-Dominion Bank agreed to pay $6.3 billion for Chrysler Financial. And earlier this month the Bank of Montreal bought Marshall & Ilsley, a bank based in Milwaukee, for $4.1 billion.
Given the uneven success of previous forays south of the border, however, few investors expect much good to come of either deal.
“We don’t think it’s a great idea for Canadian banks to be expanding into the American market,” said J. Bradley Smith, the head of research at Stonecap Securities in Toronto. “From a cultural perspective, we’re very similar. But from a management perspective, the American market is not an easy threshold to cross.”
Still, Canadian banks have few other options for expansion.
“The banks simply have no choice,” said Louis Gagnon, an associate professor of finance at Queen’s University in Kingston, Ontario. “They have to go beyond our borders to grow and the only market that makes sense is the United States.”
In their home market, Canada’s top five banks — the Royal Bank of Canada, the Toronto-Dominion Bank, the Bank of Nova Scotia, the Canadian Imperial Bank of Commerce and the Bank of Montreal — offer a complete range of banking, from retail to investment banking through a nationwide chain of branches. Changes in regulation have also allowed them to expand, on a limited basis, into insurance while most brokerage houses became bank subsidiaries.
That market dominance, and some regulatory restrictions, mean that competition from foreign-owned banks in Canada is limited. At the same time, the managers of Canadian banks are immune from takeover pressures because of federal laws that prohibit any person or company from owning more than 20 percent of a chartered bank.
While that has made for a orderly financial system for Canada that is very profitable for bank investors, the banks now find themselves accumulating substantial capital without effective ways to use it to increase their businesses within Canada.
The recent rise of consumer debt in Canada has added to the problem. Both Mark J. Carney, the governor of the Bank of Canada, suggested this month that it had become time for banks to restrict consumer lending, a proposal later echoed Jim Flaherty, Canada’s minister of finance.
The United States looks like an enticing market, but as Professor Gagnon said the results have historically been uninspiring.
By most estimates, the Canadian Imperial Bank of Commerce has fared poorest in the United States. In 2007, burdened by claims from Enron investors against its American unit, the bank sold the bulk of its United States operations to Oppenheimer Holdings.
The Royal Bank of Canada’s RBC Centura unit, which is mainly active in the southeastern United States, Toronto-Dominion’s TD Banknorth, which covers the Northeast, and the Bank of Montreal’s Harris Bank, based in Chicago, have not been similar experiences. But they are all consistent underperformers relative to their parent companies’ operations in Canada.
Toronto-Dominion has been the most aggressive in the United States recently. Ed Clark, its chief executive, has exported a formula that he used to substantially increase Toronto-Dominion’s lucrative retail business after it acquired Canada Trust, which he previously headed, in 2000. In short, it emphasizes improvements in customer service like longer business hours.
Whether that plan will succeed remains to be seen, but Canada’s banks are not the only Canadian companies that have found that their success at home do not necessarily translate to the large and more competitive environment of the United States.
For example, Tim Hortons, the doughnut and coffee shop chain, dominates Canada’s fast-food market to a degree without a parallel in the United States and successfully opens new stores rapidly. But continuing struggles with its American expansion forced the closing of 54 outlets in New England last month. Regardless, James L. Darroch, the director of the financial services program at the Schulich School of Business at York University in Toronto, said that the revamping of the American financial sector would most likely force Canadian banks to increase their investments in the United States.
“Either you’ve got to expand in the U.S. to become profitable or you’ve got to exit,” he said. “If you want to stay in that market, now’s the opportunity to shape it. The question is: ‘Can you do it right?’ ”
Uniquely, the Bank of Nova Scotia has looked outside of the United States for its growth and expansion, primarily to Latin America and China.
While that strategy has brought some missteps, particularly during Mexico’s currency crisis, it has generally been more fruitful than its competitors’ efforts in the United States.
The downside of Nova Scotia’s approach, said Professor Gagnon, who is a former senior manager at the Royal Bank, is that those markets usually take much longer to develop and do not afford the large takeover opportunities that are readily available in the United States.
While Mr. Smith, the analyst, is skeptical about further expansion by Canadian bankers in the United States, he has high praise for their skills, particularly in areas like risk management.
“I feel for the managers of Canadian banks because they’re under a lot of pressure from analysts and investors,” he said. “But the success of Canadian companies in general, even beyond banks, in expanding into the U.S. is pretty spotty over the long haul.”
Stephen Harper, the prime minister of Canada, is among the many Canadians who regularly remind the world that their country’s banking system was left largely unscathed by the global recession and credit market collapse because of its regulation and prudent management.
Now several of the banks are taking advantage of their solid balance sheets as well as the current revamping and consolidation of the American banking system to again look south for expansion. Last week, the Toronto-Dominion Bank agreed to pay $6.3 billion for Chrysler Financial. And earlier this month the Bank of Montreal bought Marshall & Ilsley, a bank based in Milwaukee, for $4.1 billion.
Given the uneven success of previous forays south of the border, however, few investors expect much good to come of either deal.
“We don’t think it’s a great idea for Canadian banks to be expanding into the American market,” said J. Bradley Smith, the head of research at Stonecap Securities in Toronto. “From a cultural perspective, we’re very similar. But from a management perspective, the American market is not an easy threshold to cross.”
Still, Canadian banks have few other options for expansion.
“The banks simply have no choice,” said Louis Gagnon, an associate professor of finance at Queen’s University in Kingston, Ontario. “They have to go beyond our borders to grow and the only market that makes sense is the United States.”
In their home market, Canada’s top five banks — the Royal Bank of Canada, the Toronto-Dominion Bank, the Bank of Nova Scotia, the Canadian Imperial Bank of Commerce and the Bank of Montreal — offer a complete range of banking, from retail to investment banking through a nationwide chain of branches. Changes in regulation have also allowed them to expand, on a limited basis, into insurance while most brokerage houses became bank subsidiaries.
That market dominance, and some regulatory restrictions, mean that competition from foreign-owned banks in Canada is limited. At the same time, the managers of Canadian banks are immune from takeover pressures because of federal laws that prohibit any person or company from owning more than 20 percent of a chartered bank.
While that has made for a orderly financial system for Canada that is very profitable for bank investors, the banks now find themselves accumulating substantial capital without effective ways to use it to increase their businesses within Canada.
The recent rise of consumer debt in Canada has added to the problem. Both Mark J. Carney, the governor of the Bank of Canada, suggested this month that it had become time for banks to restrict consumer lending, a proposal later echoed Jim Flaherty, Canada’s minister of finance.
The United States looks like an enticing market, but as Professor Gagnon said the results have historically been uninspiring.
By most estimates, the Canadian Imperial Bank of Commerce has fared poorest in the United States. In 2007, burdened by claims from Enron investors against its American unit, the bank sold the bulk of its United States operations to Oppenheimer Holdings.
The Royal Bank of Canada’s RBC Centura unit, which is mainly active in the southeastern United States, Toronto-Dominion’s TD Banknorth, which covers the Northeast, and the Bank of Montreal’s Harris Bank, based in Chicago, have not been similar experiences. But they are all consistent underperformers relative to their parent companies’ operations in Canada.
Toronto-Dominion has been the most aggressive in the United States recently. Ed Clark, its chief executive, has exported a formula that he used to substantially increase Toronto-Dominion’s lucrative retail business after it acquired Canada Trust, which he previously headed, in 2000. In short, it emphasizes improvements in customer service like longer business hours.
Whether that plan will succeed remains to be seen, but Canada’s banks are not the only Canadian companies that have found that their success at home do not necessarily translate to the large and more competitive environment of the United States.
For example, Tim Hortons, the doughnut and coffee shop chain, dominates Canada’s fast-food market to a degree without a parallel in the United States and successfully opens new stores rapidly. But continuing struggles with its American expansion forced the closing of 54 outlets in New England last month. Regardless, James L. Darroch, the director of the financial services program at the Schulich School of Business at York University in Toronto, said that the revamping of the American financial sector would most likely force Canadian banks to increase their investments in the United States.
“Either you’ve got to expand in the U.S. to become profitable or you’ve got to exit,” he said. “If you want to stay in that market, now’s the opportunity to shape it. The question is: ‘Can you do it right?’ ”
Uniquely, the Bank of Nova Scotia has looked outside of the United States for its growth and expansion, primarily to Latin America and China.
While that strategy has brought some missteps, particularly during Mexico’s currency crisis, it has generally been more fruitful than its competitors’ efforts in the United States.
The downside of Nova Scotia’s approach, said Professor Gagnon, who is a former senior manager at the Royal Bank, is that those markets usually take much longer to develop and do not afford the large takeover opportunities that are readily available in the United States.
While Mr. Smith, the analyst, is skeptical about further expansion by Canadian bankers in the United States, he has high praise for their skills, particularly in areas like risk management.
“I feel for the managers of Canadian banks because they’re under a lot of pressure from analysts and investors,” he said. “But the success of Canadian companies in general, even beyond banks, in expanding into the U.S. is pretty spotty over the long haul.”
Most Asian Stocks Rise; Japan Climbs on Tie-Ups as China Reverses Advance
Most Asian stocks climbed, with the regional benchmark near a 2 1/2-year high, as Japanese shares advanced after news reports of business alliances. Chinese stocks reversed earlier gains after the country’s official interest rates were raised over the weekend.
Elpida Memory Inc., the world’s third-largest maker of computer-memory chips, gained 1.6 percent after Kyodo news reported it is in talks with Taiwan semiconductor companies on a business tie-up. Canon Inc. and Hitachi Ltd. climbed at least 0.7 percent after the Nikkei newspaper said Taiwan’s Hon Hai Precision Industry Co. plans to acquire control of their liquid- crystal display venture. Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, fell 0.7 percent after gaining as much as 1 percent in the wake of China’s decision to increase interest rates as it battles inflation.
The MSCI Asia Pacific Index gained 0.2 percent to 135.52 as of 7:33 p.m. in Tokyo, with four stocks gaining for every three that fell. The gauge earlier touched an intraday high of 135.72, its topmost level since July 24, 2008.
“There’s selective buying on company news,” Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., which manages about $57 billion. “The business environment for manufacturers, especially semiconductor-related makers, is gradually getting better.”
Regional Benchmarks
Japan’s Nikkei 225 Stock Average gained 0.8 percent. South Korea’s Kospi Index slipped 0.4 percent. Taiwan’s Taiex index climbed 0.4 percent. India’s Sensex Index slipped 0.2 percent. Markets in Australia, New Zealand and Hong Kong are closed today for a holiday.
The Shanghai Composite Index fell 1.9 percent, reversing an earlier gain of as much as 1.5 percent. China raised interest rates for the second time in just over two months on Dec. 25 after consumer prices jumped the most in 28 months and the government forecast “relatively high” inflation in the first half of 2011.
The benchmark one-year lending rate will rise by a further 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent, the People’s Bank of China said in a statement on its website on Dec 25. It became effective yesterday.
“There’s a realization setting in that perhaps China’s problems are a bit more serious, and this is the first of many increases and this is going to result in tighter liquidity, and tighter liquidity is bad for stock prices,” said Peter Elston, a Singapore-based strategist at Aberdeen Asset Management Plc, which oversees about $281.6 billion.
S&P 500 Futures
Futures on the U.S. Standard & Poor’s 500 Index fell 0.4 percent today. The gauge declined on Dec. 23 after a five-day rally sent the average price to earnings ratio of stocks in the Standard & Poor’s 500 Index to the most expensive level since June, offsetting a rebound in orders for durable goods and a drop in unemployment claims. The measure was closed on Dec. 24.
The MSCI Asia Pacific index has risen 12 percent this year through Dec. 24 on speculation that growth in corporate profits will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound. Stocks on the Asian benchmark trade at 14.8 times estimated earnings, compared with about 22 times at the beginning of the year.
Elpida gained 1.6 percent to 942 yen. The company is in talks with Powerchip Technology Corp. and other Taiwanese chip companies on business tie-ups including mergers and capital alliances, Kyodo news agency reported.
Hitachi, Hon Hai
Dai Nippon Printing Co., a provider of printing services, rallied 1.8 percent to 1,122 yen. The company will triple production of film used for lithium-ion batteries and solar cells, the Nikkei newspaper reported, without saying where it got the information.
Hitachi Ltd. rose 0.7 percent to 411 yen and Canon Inc. climbed 0.9 percent to 4,310 yen. The Nikkei newspaper said Taiwan’s Hon Hai Precision Industry Co. plans to acquire control of Hitachi and Canon’s liquid-crystal display venture for 100 billion yen ($1.2 billion). Hon Hai was unchanged at NT$117.
Daewoo Shipbuilding & Marine Engineering Co. advanced 2.9 percent to 37,400 won in Seoul. The shipyard said it estimates orders will reach $11 billion next year, with operating profit at 1 trillion won ($869 million) and sales at 10 trillion won.
Hero Honda Motors Ltd., India’s biggest motorcycle maker, gained 0.4 percent to 1,937.85 rupees, after the Mint reported Dec. 25 that Hero Group is considering a yen-denominated loan to fund a buyout of Honda Motor Co.’s holding in the venture. Hero Group’s spokesman Ashwani Sharma declined to comment. The report didn’t say where it obtained the information.
Beijing Car Curbs
Hyundai Motor Co., South Korea’s biggest automaker by market capitalization, declined 3.4 percent to 172,500 won. The stock fell for a second day after the city of Beijing decided to limit the number of new passenger vehicles in the Chinese capital to ease congestion. Affiliate Kia Motors Corp. declined 3.5 percent.
“Beijing’s move to limit the number of new cars as well as China’s fresh monetary tightening have raised some concern about demand there and are affecting sentiment today,” said Song Seong Yeob, a fund manager at KB Asset Management Co. in Seoul, which oversees the equivalent of $17 billion in assets.
ICBC fell 0.7 percent to 4.15 yuan in Shanghai. China Vanke Co., the country’s largest-listed property developer, fell 2.9 percent to 8.75 yuan in Shenzhen. Vanke earlier increased as much as 1.7 percent.
“Investors were initially relieved as this interest-rate increase has been priced into stocks for a long time,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. “However they’re now thinking about the future; that one increase won’t be enough to bring inflation under control and more rate hikes will be needed. That’ll keep depressing valuations of stocks.”
Elpida Memory Inc., the world’s third-largest maker of computer-memory chips, gained 1.6 percent after Kyodo news reported it is in talks with Taiwan semiconductor companies on a business tie-up. Canon Inc. and Hitachi Ltd. climbed at least 0.7 percent after the Nikkei newspaper said Taiwan’s Hon Hai Precision Industry Co. plans to acquire control of their liquid- crystal display venture. Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, fell 0.7 percent after gaining as much as 1 percent in the wake of China’s decision to increase interest rates as it battles inflation.
The MSCI Asia Pacific Index gained 0.2 percent to 135.52 as of 7:33 p.m. in Tokyo, with four stocks gaining for every three that fell. The gauge earlier touched an intraday high of 135.72, its topmost level since July 24, 2008.
“There’s selective buying on company news,” Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., which manages about $57 billion. “The business environment for manufacturers, especially semiconductor-related makers, is gradually getting better.”
Regional Benchmarks
Japan’s Nikkei 225 Stock Average gained 0.8 percent. South Korea’s Kospi Index slipped 0.4 percent. Taiwan’s Taiex index climbed 0.4 percent. India’s Sensex Index slipped 0.2 percent. Markets in Australia, New Zealand and Hong Kong are closed today for a holiday.
The Shanghai Composite Index fell 1.9 percent, reversing an earlier gain of as much as 1.5 percent. China raised interest rates for the second time in just over two months on Dec. 25 after consumer prices jumped the most in 28 months and the government forecast “relatively high” inflation in the first half of 2011.
The benchmark one-year lending rate will rise by a further 25 basis points to 5.81 percent and the one-year deposit rate will climb by the same amount to 2.75 percent, the People’s Bank of China said in a statement on its website on Dec 25. It became effective yesterday.
“There’s a realization setting in that perhaps China’s problems are a bit more serious, and this is the first of many increases and this is going to result in tighter liquidity, and tighter liquidity is bad for stock prices,” said Peter Elston, a Singapore-based strategist at Aberdeen Asset Management Plc, which oversees about $281.6 billion.
S&P 500 Futures
Futures on the U.S. Standard & Poor’s 500 Index fell 0.4 percent today. The gauge declined on Dec. 23 after a five-day rally sent the average price to earnings ratio of stocks in the Standard & Poor’s 500 Index to the most expensive level since June, offsetting a rebound in orders for durable goods and a drop in unemployment claims. The measure was closed on Dec. 24.
The MSCI Asia Pacific index has risen 12 percent this year through Dec. 24 on speculation that growth in corporate profits will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound. Stocks on the Asian benchmark trade at 14.8 times estimated earnings, compared with about 22 times at the beginning of the year.
Elpida gained 1.6 percent to 942 yen. The company is in talks with Powerchip Technology Corp. and other Taiwanese chip companies on business tie-ups including mergers and capital alliances, Kyodo news agency reported.
Hitachi, Hon Hai
Dai Nippon Printing Co., a provider of printing services, rallied 1.8 percent to 1,122 yen. The company will triple production of film used for lithium-ion batteries and solar cells, the Nikkei newspaper reported, without saying where it got the information.
Hitachi Ltd. rose 0.7 percent to 411 yen and Canon Inc. climbed 0.9 percent to 4,310 yen. The Nikkei newspaper said Taiwan’s Hon Hai Precision Industry Co. plans to acquire control of Hitachi and Canon’s liquid-crystal display venture for 100 billion yen ($1.2 billion). Hon Hai was unchanged at NT$117.
Daewoo Shipbuilding & Marine Engineering Co. advanced 2.9 percent to 37,400 won in Seoul. The shipyard said it estimates orders will reach $11 billion next year, with operating profit at 1 trillion won ($869 million) and sales at 10 trillion won.
Hero Honda Motors Ltd., India’s biggest motorcycle maker, gained 0.4 percent to 1,937.85 rupees, after the Mint reported Dec. 25 that Hero Group is considering a yen-denominated loan to fund a buyout of Honda Motor Co.’s holding in the venture. Hero Group’s spokesman Ashwani Sharma declined to comment. The report didn’t say where it obtained the information.
Beijing Car Curbs
Hyundai Motor Co., South Korea’s biggest automaker by market capitalization, declined 3.4 percent to 172,500 won. The stock fell for a second day after the city of Beijing decided to limit the number of new passenger vehicles in the Chinese capital to ease congestion. Affiliate Kia Motors Corp. declined 3.5 percent.
“Beijing’s move to limit the number of new cars as well as China’s fresh monetary tightening have raised some concern about demand there and are affecting sentiment today,” said Song Seong Yeob, a fund manager at KB Asset Management Co. in Seoul, which oversees the equivalent of $17 billion in assets.
ICBC fell 0.7 percent to 4.15 yuan in Shanghai. China Vanke Co., the country’s largest-listed property developer, fell 2.9 percent to 8.75 yuan in Shenzhen. Vanke earlier increased as much as 1.7 percent.
“Investors were initially relieved as this interest-rate increase has been priced into stocks for a long time,” said Dai Ming, a fund manager at Shanghai Kingsun Investment Management & Consulting Co. “However they’re now thinking about the future; that one increase won’t be enough to bring inflation under control and more rate hikes will be needed. That’ll keep depressing valuations of stocks.”
Sensitive Index Drops; Reliance Communications, Bharti Airtel Lead Decline
India’s benchmark stock index fell, led by telecommunications companies as investors sold after recent gains.
Reliance Communications Ltd., the nation’s second-largest mobile-phone operator, dropped 3.5 percent, its biggest loss in more than two weeks. The stock surged more than 10 percent on Dec. 24 amid speculation Reliance Industries Ltd. will buy a stake. Bharti Airtel Ltd., the largest mobile-phone operator, slid 1.9 percent after gaining 4.7 percent in the last three trading sessions.
“Investors took money off the table following recent gains in some stocks, especially in the telecom sector,” said Ambareesh Baliga, a Mumbai-based vice president at Karvy Stock Broking Ltd. “The markets overall seem lackluster as there are no fresh triggers for investors to act on”
The Bombay Stock Exchange’s key Sensitive Index, or Sensex, lost 44.73, or 0.2 percent, to 20,028.93 at the 3:30 p.m. close in Mumbai. Companies on the measure are valued at an average 19 times estimated earnings, compared with a recent peak of 20.1 times on Nov. 5. The gauge rose 1.1 percent last week.
The S&P CNX Nifty Index on the National Stock Exchange slid 0.2 percent to 5,998.10, while the BSE 200 Index retreated 0.3 percent to 2,476.12.
Reliance Communications fell the most since Dec. 9 to 137 rupees. Speculation that Reliance Industries may buy a stake made the phone company the second-biggest gainer on the Sensex last week. Manoj Warrier, a spokesman for Reliance Industries, denied the country’s biggest company by market value had bought a stake in the wireless carrier.
Bharti Airtel slid the most in a week to 341.90 rupees.
Metal Producers
Sterlite Industries (India) Ltd., the biggest copper producer, snapped a four-day winning streak, pacing declines among metal producers. It lost 3.1 percent to 179.30 rupees.
Hindalco Industries Ltd., the aluminum producer that controls Atlanta-based Novelis Inc., slid 0.8 percent to 237.65 rupees. Tata Steel Ltd., the nation’s largest producer of the alloy, retreated 1.5 percent to 662.55 rupees.
Foreign funds sold a net 999 million rupees ($22.1 million) of Indian equities on Dec. 23, paring this year’s record flows in equities to 1.3 trillion rupees, according to data on the website of the Securities and Exchange Board of India.
Reliance Communications Ltd., the nation’s second-largest mobile-phone operator, dropped 3.5 percent, its biggest loss in more than two weeks. The stock surged more than 10 percent on Dec. 24 amid speculation Reliance Industries Ltd. will buy a stake. Bharti Airtel Ltd., the largest mobile-phone operator, slid 1.9 percent after gaining 4.7 percent in the last three trading sessions.
“Investors took money off the table following recent gains in some stocks, especially in the telecom sector,” said Ambareesh Baliga, a Mumbai-based vice president at Karvy Stock Broking Ltd. “The markets overall seem lackluster as there are no fresh triggers for investors to act on”
The Bombay Stock Exchange’s key Sensitive Index, or Sensex, lost 44.73, or 0.2 percent, to 20,028.93 at the 3:30 p.m. close in Mumbai. Companies on the measure are valued at an average 19 times estimated earnings, compared with a recent peak of 20.1 times on Nov. 5. The gauge rose 1.1 percent last week.
The S&P CNX Nifty Index on the National Stock Exchange slid 0.2 percent to 5,998.10, while the BSE 200 Index retreated 0.3 percent to 2,476.12.
Reliance Communications fell the most since Dec. 9 to 137 rupees. Speculation that Reliance Industries may buy a stake made the phone company the second-biggest gainer on the Sensex last week. Manoj Warrier, a spokesman for Reliance Industries, denied the country’s biggest company by market value had bought a stake in the wireless carrier.
Bharti Airtel slid the most in a week to 341.90 rupees.
Metal Producers
Sterlite Industries (India) Ltd., the biggest copper producer, snapped a four-day winning streak, pacing declines among metal producers. It lost 3.1 percent to 179.30 rupees.
Hindalco Industries Ltd., the aluminum producer that controls Atlanta-based Novelis Inc., slid 0.8 percent to 237.65 rupees. Tata Steel Ltd., the nation’s largest producer of the alloy, retreated 1.5 percent to 662.55 rupees.
Foreign funds sold a net 999 million rupees ($22.1 million) of Indian equities on Dec. 23, paring this year’s record flows in equities to 1.3 trillion rupees, according to data on the website of the Securities and Exchange Board of India.
Sunday, December 26, 2010
Online Bazaar Builds on Its Base With Sense of Community
In technology circles, people talk about the merits of eating your own dog food — making sure your company is actually using the same products or services it is selling.
Etsy, an independent online marketplace for handmade products and vintage goods, is getting its fair share of dog food.
Most everything in the company’s sprawling offices in the Dumbo neighborhood of Brooklyn is from sellers on Etsy.com, from the long panels of gingham curtains covering the windows to the mismatched desks and work tables. An elaborate chandelier and a pair of six-foot-long wooden eyeglasses rest in the middle of one room; a rowboat is perched in the opposite corner.
Since it was founded in 2005 as a way for hobbyists and crafty types to sell their goods, Etsy has blossomed into a thriving e-commerce site and one of New York’s hottest start-ups. The company says it expects to bring in $30 million to $50 million in revenue this year and has been profitable for a year. It has seven million registered users, nearly twice what it had a year ago.
Robert Kalin, the co-founder and chief executive of Etsy, said the site was catching on because many people now want their buying habits to reflect their values, as indicated by the surging interest in farmers’ markets and local clothing designers.
“It’s not just ‘you are what you eat’ anymore,” he said. “You are what you buy, and these things define you.”
Mr. Kalin, 30, and his partners Chris Maguire and Haim Schoppik started Etsy in Mr. Kalin’s Brooklyn apartment after he was unable to find a good place online to sell his fully functional “inside-out computers,” which are encased in oak and covered with a transparent orange lid so the machine’s guts are visible.
Even now, Mr. Kalin is one of the site’s most prolific patrons, regularly snapping up items like custom three-piece suits, intricately woven wall tapestries and ceramic sculptures of doves.
Etsy says it is on track to handle close to $400 million in transactions this year, more than double last year’s figure. That pales in comparison to eBay, still the king of person-to-person online sales. Analysts say eBay could process as much as $15 billion in sales this year, excluding cars.
But eBay, which came to prominence in the dot-com boom, has gone from resembling an overflowing garage sale to being something closer to Wal-Mart in the eyes of many shoppers. It has struggled to reinvigorate its marketplace and alienated many of the smaller sellers that were once its lifeblood.
Comparing Etsy and eBay is like looking at “a toddler and a senior citizen, in terms of scale and scope of the business,” said Colin Gillis, an analyst with BGC Partners who keeps a close eye on eBay. But he said eBay’s troubles could offer cautionary lessons for Etsy as it grows.
“Be careful with sprawl,” Mr. Gillis advised. “Ultimately, eBay has come back to the conclusion that our ultimate goal is to connect buyers and sellers. EBay has to return to its roots of making itself a useful marketplace.”
If Etsy continues to charm younger, hipper and tech-savvier online shoppers, Mr. Gillis said, it could carve out a healthy slice of market share.
Kathy Chui, a spokeswoman for eBay, said that the company still had a healthy marketplace with about 93 million buyers and more than 200 million sale listings. In addition, she said, eBay “continues to lead and innovate in areas like mobile and on our core site with engaging shopping experiences like fashion.”
Mr. Kalin says his company’s focus on community and independent sellers will help it avoid eBay’s missteps. The troubles at eBay, he said, were caused by more than just bad business decisions. “It is a symptom of our times,” he said. “They looked to maximize profitability over community.”
Mr. Kalin points to the growing abundance of polished, high-end items from professional designers, furniture makers, confectioners and jewelry makers who are able to make a living by selling their wares through Etsy.
“You will find things on Etsy that you won’t anywhere else, things that are entirely unique,” he said.
Etsy is working to ensure that as the site gets bigger, it still feels more like a treasure trove of goodies than a chaotic sidewalk sale. The company sends out daily “Etsy Finds” e-mails that are usually put together by a staff member or a popular merchant. These display a handful of items arranged around a central theme or color scheme. A recent edition featured a pair of English riding boots, circular chalkboards, hand-stamped napkins, a chunky knitted cowl and a pair of midcentury, bright red mesh chairs.
The site is meant to resemble a funky boutique. Merchants can design the virtual storefronts of their shops, and many feature stylized photos and witty descriptions of their offerings.
The folksy appeal of Etsy’s site creates a kind of intimacy between buyers and sellers, said Rachel Botsman, co-author of the book “What’s Mine Is Yours: The Rise of Collaborative Consumption.” And shoppers can feel good about their purchases because the experience is similar to that of supporting an independent crafter or local artist at a flea market.
“Some people are more interested in buying an item or a good with a story behind it,” Ms. Botsman said. “There’s a backlash against anonymous mass-produced goods, and eBay feels as though it’s been taken over by mass-produced goods.”
Etsy’s virtual shops are brimming with nearly eight million items from more than 400,000 sellers. It charges sellers a small fee to list items, as well as a processing fee for transactions. Sellers can pay to promote goods in prominent areas of on the site, like the “Showcase” page.
Many who make a living or supplement their income by selling goods online say they like the tight-knit community feel of Etsy, which offers online forums and real-life gatherings for members.
“The vibe is like sitting in a room with crafters, drinking tea and laughing,” said Lori Hammond, a 49-year-old retired bakery manager living in Portland, Me.
Claire Ferrante, 28, who lives and works in Boston as a public relations manager for a software company by day and peddles her thrift-store finds by night, has been selling items on eBay for several years. She joined Etsy last year and said she preferred the younger site, which is devoid of the creaky technology and impersonal feel that plagues eBay.
“The process is so much easier,” she said. “You can pick an avatar, make your own masthead. The listings look better, and the browsing experience is better.”
“I don’t sell much of anything on eBay anymore,” she added.
Etsy, an independent online marketplace for handmade products and vintage goods, is getting its fair share of dog food.
Most everything in the company’s sprawling offices in the Dumbo neighborhood of Brooklyn is from sellers on Etsy.com, from the long panels of gingham curtains covering the windows to the mismatched desks and work tables. An elaborate chandelier and a pair of six-foot-long wooden eyeglasses rest in the middle of one room; a rowboat is perched in the opposite corner.
Since it was founded in 2005 as a way for hobbyists and crafty types to sell their goods, Etsy has blossomed into a thriving e-commerce site and one of New York’s hottest start-ups. The company says it expects to bring in $30 million to $50 million in revenue this year and has been profitable for a year. It has seven million registered users, nearly twice what it had a year ago.
Robert Kalin, the co-founder and chief executive of Etsy, said the site was catching on because many people now want their buying habits to reflect their values, as indicated by the surging interest in farmers’ markets and local clothing designers.
“It’s not just ‘you are what you eat’ anymore,” he said. “You are what you buy, and these things define you.”
Mr. Kalin, 30, and his partners Chris Maguire and Haim Schoppik started Etsy in Mr. Kalin’s Brooklyn apartment after he was unable to find a good place online to sell his fully functional “inside-out computers,” which are encased in oak and covered with a transparent orange lid so the machine’s guts are visible.
Even now, Mr. Kalin is one of the site’s most prolific patrons, regularly snapping up items like custom three-piece suits, intricately woven wall tapestries and ceramic sculptures of doves.
Etsy says it is on track to handle close to $400 million in transactions this year, more than double last year’s figure. That pales in comparison to eBay, still the king of person-to-person online sales. Analysts say eBay could process as much as $15 billion in sales this year, excluding cars.
But eBay, which came to prominence in the dot-com boom, has gone from resembling an overflowing garage sale to being something closer to Wal-Mart in the eyes of many shoppers. It has struggled to reinvigorate its marketplace and alienated many of the smaller sellers that were once its lifeblood.
Comparing Etsy and eBay is like looking at “a toddler and a senior citizen, in terms of scale and scope of the business,” said Colin Gillis, an analyst with BGC Partners who keeps a close eye on eBay. But he said eBay’s troubles could offer cautionary lessons for Etsy as it grows.
“Be careful with sprawl,” Mr. Gillis advised. “Ultimately, eBay has come back to the conclusion that our ultimate goal is to connect buyers and sellers. EBay has to return to its roots of making itself a useful marketplace.”
If Etsy continues to charm younger, hipper and tech-savvier online shoppers, Mr. Gillis said, it could carve out a healthy slice of market share.
Kathy Chui, a spokeswoman for eBay, said that the company still had a healthy marketplace with about 93 million buyers and more than 200 million sale listings. In addition, she said, eBay “continues to lead and innovate in areas like mobile and on our core site with engaging shopping experiences like fashion.”
Mr. Kalin says his company’s focus on community and independent sellers will help it avoid eBay’s missteps. The troubles at eBay, he said, were caused by more than just bad business decisions. “It is a symptom of our times,” he said. “They looked to maximize profitability over community.”
Mr. Kalin points to the growing abundance of polished, high-end items from professional designers, furniture makers, confectioners and jewelry makers who are able to make a living by selling their wares through Etsy.
“You will find things on Etsy that you won’t anywhere else, things that are entirely unique,” he said.
Etsy is working to ensure that as the site gets bigger, it still feels more like a treasure trove of goodies than a chaotic sidewalk sale. The company sends out daily “Etsy Finds” e-mails that are usually put together by a staff member or a popular merchant. These display a handful of items arranged around a central theme or color scheme. A recent edition featured a pair of English riding boots, circular chalkboards, hand-stamped napkins, a chunky knitted cowl and a pair of midcentury, bright red mesh chairs.
The site is meant to resemble a funky boutique. Merchants can design the virtual storefronts of their shops, and many feature stylized photos and witty descriptions of their offerings.
The folksy appeal of Etsy’s site creates a kind of intimacy between buyers and sellers, said Rachel Botsman, co-author of the book “What’s Mine Is Yours: The Rise of Collaborative Consumption.” And shoppers can feel good about their purchases because the experience is similar to that of supporting an independent crafter or local artist at a flea market.
“Some people are more interested in buying an item or a good with a story behind it,” Ms. Botsman said. “There’s a backlash against anonymous mass-produced goods, and eBay feels as though it’s been taken over by mass-produced goods.”
Etsy’s virtual shops are brimming with nearly eight million items from more than 400,000 sellers. It charges sellers a small fee to list items, as well as a processing fee for transactions. Sellers can pay to promote goods in prominent areas of on the site, like the “Showcase” page.
Many who make a living or supplement their income by selling goods online say they like the tight-knit community feel of Etsy, which offers online forums and real-life gatherings for members.
“The vibe is like sitting in a room with crafters, drinking tea and laughing,” said Lori Hammond, a 49-year-old retired bakery manager living in Portland, Me.
Claire Ferrante, 28, who lives and works in Boston as a public relations manager for a software company by day and peddles her thrift-store finds by night, has been selling items on eBay for several years. She joined Etsy last year and said she preferred the younger site, which is devoid of the creaky technology and impersonal feel that plagues eBay.
“The process is so much easier,” she said. “You can pick an avatar, make your own masthead. The listings look better, and the browsing experience is better.”
“I don’t sell much of anything on eBay anymore,” she added.
Consumer-Backed Bond Sales to Diminish After Fed Ends TALF: Credit Markets
Bond offerings tied to automobile loans and leases are poised to dominate sales of asset-backed debt for a third straight year in 2011 after issuance of all types of the securities plunged 31 percent in 2009.
Vehicle debt bundled into securities will likely total from $70 billion to $75 billion, up as much as 23 percent from 2010, as auto sales rebound from a 27-year low, according to Barclays Capital. Bond sales linked to auto and education loans, and credit cards may reach $115 billion in 2011, Barclays said.
Total issuance fell to $92 billion this year from $134 billion as banks relied more heavily on deposits to fund credit card lending and the Federal Reserve ended its Term Asset-Backed Securities Loan Facility, which financed investors buying asset- backed securities.
“The auto finance companies continue to originate good volumes of new loans,” Brian Wiele, a managing director at Barclays in New York, said in a telephone interview. “They are not banks, and securitization offers attractive funding.”
Automakers are tapping the so-called asset-backed bond market as they anticipate car and truck sales reaching 12.8 million next year. Dearborn, Michigan-based Ford Motor Co., the only one of the three Detroit-area automakers that didn’t take government aid during the financial crisis, was the biggest ABS issuer in 2010, Barclays data show, offering $9.8 billion.
Bond Spreads
More than 66 percent, or $61 billion, of this year’s asset- backed securities sales were connected to automobile debt.
Top rated securities linked to auto loans yield 56 basis points, or 0.56 percentage point, more than Treasuries , according to Bank of America/Merrill Lynch data. That compares with relative yields of 193 basis points for bonds backed by student loans and a spread of 68 basis points for credit cards.
Spreads for auto-backed debt narrowed 25 basis points from Dec. 31, 2009 through Dec. 24, the Bank of America index shows. Spreads for asset-backed securities linked to student loans shrank 3 basis points to 193, while bonds tied to credit card payments saw their relative yields contract 24 basis points.
Elsewhere in credit markets, corporate bond sales worldwide total $3.18 trillion this year, down from $3.877 trillion in 2009. The extra yield investors demand to own company debt instead of Treasuries finished last week at the lowest in a month. Prices of leveraged, or speculative-grade, loans rose for a third week, while emerging-market debt spreads narrowed.
Credit-Default Swaps
The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.78 basis points to a mid-price of 85.53, according to Markit Group Ltd. The index typically rises as investor confidence deteriorates and declines as it improves.
Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
The extra yield investors demand to own corporate bonds worldwide instead of similar-maturity government debt was unchanged at 166 basis points, or 1.66 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. Yields averaged 4.2 percent.
Corporate bonds have lost 1.01 percent in December, trimming this year’s gains to 6.81 percent, including reinvested interest. That compares with 3.42 percent for the firm’s Global Sovereign Broad Market Plus Index and 11.9 percent for the MSCI World Index of stocks, including reinvested dividends.
Loans Rally
The S&P/LSTA U.S. Leveraged Loan 100 Index ended Dec. 23 at 92.55 cents on the dollar, up from 87.68 cents on the dollar at the end of 2009. The index, which reached as high as 92.9 cents in April, tracks the 100 largest dollar-denominated first-lien leveraged loans.
In emerging markets, the extra yield investors demand to own corporate bonds rather than government debt shrank 14 basis points to 240 basis points as of Dec. 24, according to JPMorgan Chase & Co. index data. Spreads have ranged from as wide as 346 basis points in May to as narrow as 219 this month.
Sales of bonds tied to consumer and small-business loans plummeted 42 percent in 2008 as lending shriveled during the credit crisis, according to data compiled by Bloomberg.
The Fed’s Term Asset-Backed Securities Loan Facility, or TALF, helped revive sales temporarily by lending to investors seeking to buy asset-backed bonds. The program lasted from July 2009 through March.
Credit-Card Slump
While TALF bolstered the market, sales of asset-backed debt tied to household borrowing are falling primarily due to an 85 percent drop in sales of bonds tied to credit card payments, according to a Dec. 13 Barclays report.
Financial Accounting Standards Board rules that took effect in January require banks to hold loans that were bundled and sold to investors on the balance sheet, meaning they have to maintain capital against the debt.
Credit card companies are also enjoying cheaper funding from deposits, said the New York-based analysts at Barclays led by Joe Astorina.
“A majority of issuers are banks flush with deposits,” said Barclay’s Wiele. “Banks incentives to securitize credit cards aren’t what they used to be.”
Prices on bonds linked to credit-cards may get a temporary boost as supply remains muted before demand wanes, said James Grady of Deutsche Asset Management.
‘Orphan Sector’
“At some point this becomes an orphan sector,” said Grady, a managing director in New York at the firm, which manages $240 billion. “There will be less liquidity, and it can’t have a meaningful impact large investors’ portfolios.”
Issuance of securities tied to student borrowings fell to $17.8 billion in 2010 from $20 billion the previous year as the U.S. government eliminated the Federal Family Education Loan Program. The change cut private lenders out of the market for originating government-guaranteed loans, slashing the volume of debt available for companies to package into bonds, according to Barclays.
Sales will be between $12 billion and $15 billion in 2011, Barclays analysts said in the report earlier this month. Issuance of so-called esoteric asset-backed securities, or bonds tied to unusual or riskier assets, are set to climb in 2011, according to Barclays’ Wiele. Barclays and Morgan Stanley sold $253.75 million of bonds tied to revenue from billboards operated by Adams Outdoor Advertising LP on Dec. 3, Bloomberg data show.
“The market has recovered to the point where people are willing to look at these transactions and consider the risk and reward,” he said. “As spreads have tightened on other assets, investors have to look beyond those assets for yields.”
Vehicle debt bundled into securities will likely total from $70 billion to $75 billion, up as much as 23 percent from 2010, as auto sales rebound from a 27-year low, according to Barclays Capital. Bond sales linked to auto and education loans, and credit cards may reach $115 billion in 2011, Barclays said.
Total issuance fell to $92 billion this year from $134 billion as banks relied more heavily on deposits to fund credit card lending and the Federal Reserve ended its Term Asset-Backed Securities Loan Facility, which financed investors buying asset- backed securities.
“The auto finance companies continue to originate good volumes of new loans,” Brian Wiele, a managing director at Barclays in New York, said in a telephone interview. “They are not banks, and securitization offers attractive funding.”
Automakers are tapping the so-called asset-backed bond market as they anticipate car and truck sales reaching 12.8 million next year. Dearborn, Michigan-based Ford Motor Co., the only one of the three Detroit-area automakers that didn’t take government aid during the financial crisis, was the biggest ABS issuer in 2010, Barclays data show, offering $9.8 billion.
Bond Spreads
More than 66 percent, or $61 billion, of this year’s asset- backed securities sales were connected to automobile debt.
Top rated securities linked to auto loans yield 56 basis points, or 0.56 percentage point, more than Treasuries , according to Bank of America/Merrill Lynch data. That compares with relative yields of 193 basis points for bonds backed by student loans and a spread of 68 basis points for credit cards.
Spreads for auto-backed debt narrowed 25 basis points from Dec. 31, 2009 through Dec. 24, the Bank of America index shows. Spreads for asset-backed securities linked to student loans shrank 3 basis points to 193, while bonds tied to credit card payments saw their relative yields contract 24 basis points.
Elsewhere in credit markets, corporate bond sales worldwide total $3.18 trillion this year, down from $3.877 trillion in 2009. The extra yield investors demand to own company debt instead of Treasuries finished last week at the lowest in a month. Prices of leveraged, or speculative-grade, loans rose for a third week, while emerging-market debt spreads narrowed.
Credit-Default Swaps
The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.78 basis points to a mid-price of 85.53, according to Markit Group Ltd. The index typically rises as investor confidence deteriorates and declines as it improves.
Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.
The extra yield investors demand to own corporate bonds worldwide instead of similar-maturity government debt was unchanged at 166 basis points, or 1.66 percentage points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. Yields averaged 4.2 percent.
Corporate bonds have lost 1.01 percent in December, trimming this year’s gains to 6.81 percent, including reinvested interest. That compares with 3.42 percent for the firm’s Global Sovereign Broad Market Plus Index and 11.9 percent for the MSCI World Index of stocks, including reinvested dividends.
Loans Rally
The S&P/LSTA U.S. Leveraged Loan 100 Index ended Dec. 23 at 92.55 cents on the dollar, up from 87.68 cents on the dollar at the end of 2009. The index, which reached as high as 92.9 cents in April, tracks the 100 largest dollar-denominated first-lien leveraged loans.
In emerging markets, the extra yield investors demand to own corporate bonds rather than government debt shrank 14 basis points to 240 basis points as of Dec. 24, according to JPMorgan Chase & Co. index data. Spreads have ranged from as wide as 346 basis points in May to as narrow as 219 this month.
Sales of bonds tied to consumer and small-business loans plummeted 42 percent in 2008 as lending shriveled during the credit crisis, according to data compiled by Bloomberg.
The Fed’s Term Asset-Backed Securities Loan Facility, or TALF, helped revive sales temporarily by lending to investors seeking to buy asset-backed bonds. The program lasted from July 2009 through March.
Credit-Card Slump
While TALF bolstered the market, sales of asset-backed debt tied to household borrowing are falling primarily due to an 85 percent drop in sales of bonds tied to credit card payments, according to a Dec. 13 Barclays report.
Financial Accounting Standards Board rules that took effect in January require banks to hold loans that were bundled and sold to investors on the balance sheet, meaning they have to maintain capital against the debt.
Credit card companies are also enjoying cheaper funding from deposits, said the New York-based analysts at Barclays led by Joe Astorina.
“A majority of issuers are banks flush with deposits,” said Barclay’s Wiele. “Banks incentives to securitize credit cards aren’t what they used to be.”
Prices on bonds linked to credit-cards may get a temporary boost as supply remains muted before demand wanes, said James Grady of Deutsche Asset Management.
‘Orphan Sector’
“At some point this becomes an orphan sector,” said Grady, a managing director in New York at the firm, which manages $240 billion. “There will be less liquidity, and it can’t have a meaningful impact large investors’ portfolios.”
Issuance of securities tied to student borrowings fell to $17.8 billion in 2010 from $20 billion the previous year as the U.S. government eliminated the Federal Family Education Loan Program. The change cut private lenders out of the market for originating government-guaranteed loans, slashing the volume of debt available for companies to package into bonds, according to Barclays.
Sales will be between $12 billion and $15 billion in 2011, Barclays analysts said in the report earlier this month. Issuance of so-called esoteric asset-backed securities, or bonds tied to unusual or riskier assets, are set to climb in 2011, according to Barclays’ Wiele. Barclays and Morgan Stanley sold $253.75 million of bonds tied to revenue from billboards operated by Adams Outdoor Advertising LP on Dec. 3, Bloomberg data show.
“The market has recovered to the point where people are willing to look at these transactions and consider the risk and reward,” he said. “As spreads have tightened on other assets, investors have to look beyond those assets for yields.”
India's Government Plans Hostile Riversdale Bid to Challenge Rio's Offer
India’s government is planning to make an unsolicited bid to counter a A$3.9 billion ($3.9 billion) offer from Rio Tinto Group for Riversdale Mining Ltd.
International Coal Ventures Ltd., a group of Indian state- run metal and energy companies, hired Citigroup Inc. yesterday to study a possible counterbid for the Sydney-based coal company with mines in Mozambique, the venture’s Chairman C.S. Verma said yesterday. London-based Rio yesterday bid A$16 a share, securing 14.9 percent of Riversdale in pre-bid agreements.
Indian companies are seeking coal mines overseas to secure raw material supplies for steel and electricity. Brazil’s Vale SA or Eurasian Natural Resources Corp. may also bid, according to Sanford C. Bernstein & Co. Tata Steel Ltd., Riversdale’s biggest shareholder, said it will consider Rio’s offer “in the context of other alternatives” available.
“Financially International Coal Ventures looks strong as it has the backing of cash-rich promoters,” Navin Vohra, a partner at Ernst & Young India Ltd. said by phone from New Delhi. “However, the tag of being state-owned and unsuccessful in securing mining assets so far may weigh on its chances.”
Coal India Ltd., world’s largest producer, and Steel Authority of India Ltd., the nation’s second-largest, own about 28 percent each in International Coal Ventures. NTPC Ltd., India’s biggest power generator, NMDC Ltd., the nation’s biggest iron-ore producer, and steelmaker Rashtriya Ispat Nigam Ltd. hold about 14 percent each.
Riversdale stock climbed 0.8 percent to A$16.70 at the close of trading on the Australian stock exchange. That’s 5.6 percent more than Rio’s offer, which was recommended by all of Riversdale’s board, barring the director appointed by Tata Steel. Rio fell 1 percent to A$86.36.
Shareholder Support
A successful bid for control will need the support of at least one of Riversdale’s major shareholders, with the top-three investors owning about 51 percent. These shareholders, Tata Steel, Passport Capital LLC and Cia. Siderurgica Nacional SA, were kept informed during the talks with Rio and haven’t raised any objections, Riversdale Managing Director Steve Mallyon said in a phone interview yesterday.
“The A$16 cash offer is unlikely to secure acceptance from all of Riversdale’s shareholders,” analysts led by Hayden Bairstow at CLSA Asia-Pacific Markets, said yesterday in a report, raising his price target for Riversdale by 3 percent to A$18. Riversdale’s “Benga and Zambeze coal projects are world class and we believe other suitors may show an interest in Riversdale now a formal bid has been tabled,” he said.
Counter Bid
A counter bidder may have to pay as much as A$20.80 a share, Commonwealth Bank of Australia analysts led by Tomas Vasquez said in a report.
Riversdale hasn’t had approaches from any other company, Riversdale’s Mallyon said. Citigroup will submit its report in two weeks, Verma told reporters in New Delhi yesterday after a board meeting. ICVL hasn’t discussed Riversdale with Tata Steel, he said.
“The investment in the Benga project is strategic for Tata Steel, not the financial investment in the company,” said Giriraj Daga, an analyst who has a “buy” rating on the stock at Nirmal Bang Securities Ltd. in Mumbai. “Any decision to sell stake in the company will help Tata Steel’s balance sheet as well as its share price.”
China’s Wuhan Iron & Steel Corp. “could also show interest,” since Riversdale yesterday terminated a potential $800 million investment deal with the steelmaker, Dominic Kane, an analyst at Liberum Capital Ltd., said yesterday in a report.
International Coal Ventures Ltd., a group of Indian state- run metal and energy companies, hired Citigroup Inc. yesterday to study a possible counterbid for the Sydney-based coal company with mines in Mozambique, the venture’s Chairman C.S. Verma said yesterday. London-based Rio yesterday bid A$16 a share, securing 14.9 percent of Riversdale in pre-bid agreements.
Indian companies are seeking coal mines overseas to secure raw material supplies for steel and electricity. Brazil’s Vale SA or Eurasian Natural Resources Corp. may also bid, according to Sanford C. Bernstein & Co. Tata Steel Ltd., Riversdale’s biggest shareholder, said it will consider Rio’s offer “in the context of other alternatives” available.
“Financially International Coal Ventures looks strong as it has the backing of cash-rich promoters,” Navin Vohra, a partner at Ernst & Young India Ltd. said by phone from New Delhi. “However, the tag of being state-owned and unsuccessful in securing mining assets so far may weigh on its chances.”
Coal India Ltd., world’s largest producer, and Steel Authority of India Ltd., the nation’s second-largest, own about 28 percent each in International Coal Ventures. NTPC Ltd., India’s biggest power generator, NMDC Ltd., the nation’s biggest iron-ore producer, and steelmaker Rashtriya Ispat Nigam Ltd. hold about 14 percent each.
Riversdale stock climbed 0.8 percent to A$16.70 at the close of trading on the Australian stock exchange. That’s 5.6 percent more than Rio’s offer, which was recommended by all of Riversdale’s board, barring the director appointed by Tata Steel. Rio fell 1 percent to A$86.36.
Shareholder Support
A successful bid for control will need the support of at least one of Riversdale’s major shareholders, with the top-three investors owning about 51 percent. These shareholders, Tata Steel, Passport Capital LLC and Cia. Siderurgica Nacional SA, were kept informed during the talks with Rio and haven’t raised any objections, Riversdale Managing Director Steve Mallyon said in a phone interview yesterday.
“The A$16 cash offer is unlikely to secure acceptance from all of Riversdale’s shareholders,” analysts led by Hayden Bairstow at CLSA Asia-Pacific Markets, said yesterday in a report, raising his price target for Riversdale by 3 percent to A$18. Riversdale’s “Benga and Zambeze coal projects are world class and we believe other suitors may show an interest in Riversdale now a formal bid has been tabled,” he said.
Counter Bid
A counter bidder may have to pay as much as A$20.80 a share, Commonwealth Bank of Australia analysts led by Tomas Vasquez said in a report.
Riversdale hasn’t had approaches from any other company, Riversdale’s Mallyon said. Citigroup will submit its report in two weeks, Verma told reporters in New Delhi yesterday after a board meeting. ICVL hasn’t discussed Riversdale with Tata Steel, he said.
“The investment in the Benga project is strategic for Tata Steel, not the financial investment in the company,” said Giriraj Daga, an analyst who has a “buy” rating on the stock at Nirmal Bang Securities Ltd. in Mumbai. “Any decision to sell stake in the company will help Tata Steel’s balance sheet as well as its share price.”
China’s Wuhan Iron & Steel Corp. “could also show interest,” since Riversdale yesterday terminated a potential $800 million investment deal with the steelmaker, Dominic Kane, an analyst at Liberum Capital Ltd., said yesterday in a report.
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